-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tb4OPnpRXZbVKj/mDpyzt/9sr8yI7vkiZ9u1bQM8kqD0roIv30cxSvvwFmkB0EEe PZxNtsNEAbxiOR0PSXVY7g== 0000014827-94-000004.txt : 19940131 0000014827-94-000004.hdr.sgml : 19940131 ACCESSION NUMBER: 0000014827-94-000004 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940127 FILED AS OF DATE: 19940128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROWNING FERRIS INDUSTRIES INC CENTRAL INDEX KEY: 0000014827 STANDARD INDUSTRIAL CLASSIFICATION: 4953 IRS NUMBER: 741673682 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 34 SEC FILE NUMBER: 001-06805 FILM NUMBER: 94503271 BUSINESS ADDRESS: STREET 1: 757 N ELDRIDGE CITY: HOUSTON STATE: TX ZIP: 77079 BUSINESS PHONE: 7138708100 DEF 14A 1 PROXY BROWNING-FERRIS INDUSTRIES, INC. PROXY - ANNUAL MEETING OF STOCKHOLDERS - MARCH 2, 1994 P The undersigned stockholder of record on January 7, 1994, of Browning-Ferris Industries, Inc., a Delaware corporation R (the "Company"), hereby appoints WILLIAM D. RUCKELSHAUS and GERALD K. BURGER, either one or both of them, proxies of O the undersigned, with full power of substitution, to vote, as designated below, at the annual meeting of stockholders of the X Company to be held on March 2, 1994, at 2:00 p.m., Houston Time, in the Grand Ballroom, Marriott Westside, 13210 Katy Y Freeway, Houston, Texas, and at any adjournment thereof, the number of votes which the undersigned would be entitled to cast if personally present: To elect the following five nominees to serve as directors for three-year terms and until their successors are duly elected and qualified: Harry J. Phillips, Sr. Louis A. Waters Robert M. Teeter Peter S. Willmott Marc J. Shapiro SEE REVERSE SIDE Please mark your X votes as in this example - --- This Proxy is solicited on behalf of the Board of Directors and will be voted. If no direction is made, this Proxy will be voted FOR all of the Board of Directors' nominees and FOR proposals (2), (3) and (4). The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4. FOR WITHHELD 1. Election of Directors (see reverse) ---- ---- For, except vote withheld from the following nominee(s): - --------------------------------- FOR AGAINST ABSTAIN 2. Proposal to approve the appoint- ment of Arthur Andersen ---- ---- ---- & Co. by the Board of Directors as aud- itors for the Com- pany's 1994 fiscal year, FOR AGAINST ABSTAIN 3. Proposal to approve the adoption of ---- ---- ---- the Company's 1993 Stock Incentive Plan, FOR AGAINST ABSTAIN 4. Proposal to approve the adoption of the ---- ---- ---- Company's 1993 Non- Employee Director Stock Plan, all as more particularly described in the Proxy Statement relating to such meeting, receipt of which is hereby acknowledged. Please sign your name here exactly as it appears hereon. Joint owners must each sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as it appears hereon. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. ------------------------------------ ------------------------------------ Signature(s) Date [LOGO] BROWNING-FERRIS INDUSTRIES, INC. ----------------------------------------------------------------- Notice of 1994 Annual Meeting and Proxy Statement ----------------------------------------------------------------- Important Please sign and date your proxy and promptly return it in the enclosed envelope. [Logo] Browning-Ferris Industries, Inc. P.O. Box 3151 Houston, Texas 77253 January 27, 1994 TO OUR STOCKHOLDERS: You are cordially invited to attend the 1994 Annual Meeting of Stockholders of Browning-Ferris Industries, Inc. on March 2, 1994, at 2:00 p.m., Houston Time, in the Grand Ballroom, Marriott Westside, 13210 Katy Freeway, Houston, Texas. Whether or not you plan to be present, please sign and return your proxy as soon as possible, so that your vote will be recorded; a self-addressed envelope is provided. William D. Ruckelshaus Chairman and Chief Executive Officer NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To the Holders of Common Stock: Notice is given hereby that the Annual Meeting of Stockholders of Browning-Ferris Industries, Inc., a Delaware corporation (the "Company" or "BFI"), will be held on March 2, 1994, at 2:00 p.m., Houston Time, in the Grand Ballroom, Marriott Westside, 13210 Katy Freeway, Houston, Texas for the following purposes: (1) To elect five nominees to serve as directors for three-year terms and until their successors are duly elected and qualified. (2) To consider and vote upon a proposal to approve the selection by the Board of Directors of Arthur Andersen & Co. as auditors for the Company's 1994 fiscal year. (3) To consider and vote upon the approval of the Company's 1993 Stock Incentive Plan. (4) To consider and vote upon the approval of the Company's 1993 Non-Employee Director Stock Plan. (5) To consider and act upon such other matters as may properly come before the meeting or any adjournment thereof. The Board of Directors has determined that only those persons who were holders of record of Common Stock of the Company at the close of business on January 7, 1994, the record date, will be entitled to notice of, and to vote at, the meeting and any adjournment thereof. By Order of the Board of Directors, Gerald K. Burger Vice President and Secretary Houston, Texas January 27, 1994 Please date, sign and return the enclosed Proxy in the accompanying envelope at your earliest convenience. PROXY STATEMENT Introduction This Proxy Statement and the enclosed form of proxy will be first sent or given to stockholders on or about January 27, 1994, in connection with a solicitation of proxies by the Board of Directors of Browning-Ferris Industries, Inc., a Delaware corporation (the "Company" or "BFI"), to be used at the Annual Meeting of Stockholders of the Company to be held on March 2, 1994, at 2:00 p.m., Houston Time, in the Grand Ballroom, Marriott Westside, 13210 Katy Freeway, Houston, Texas and at any adjournment thereof (the "Meeting"), for the purposes set forth in the foregoing Notice of Annual Meeting of Stockholders. The Company's principal executive offices are located at 757 N. Eldridge, Houston, Texas 77079. All shares represented by valid proxies received in time for the Meeting, and not revoked, will be voted. Unless the stockholder otherwise specifies therein, such shares will be voted by the persons named as proxy holders: FOR the election as directors of the Company of those five nominees for director for three-year terms, as listed under the caption "Election of Directors" herein; FOR the approval of the selection by the Board of Directors of Arthur Andersen & Co. as auditors for the Company's 1994 fiscal year. FOR the approval of the Company's 1993 Stock Incentive Plan. FOR the approval of the Company's 1993 Non-Employee Director Stock Plan. The persons named as proxies in the enclosed form of proxy, William D. Ruckelshaus, Chairman and Chief Executive Officer of the Company, and Gerald K. Burger, Vice President and Secretary of the Company, were selected by the Nominating Committee of the Board of Directors of the Company. The form of proxy enclosed is for use at the Meeting if a stock- holder is unable to attend or does not desire to vote in person. Any stockholder giving a proxy has the right to revoke it at any time before the proxy is exercised, including by executing another proxy and delivering it to the Company's election judge at the Meeting or by voting in person at the Meeting. Record Date and Voting at the Meeting The holders of record on January 7, 1994, the record date, of Common Stock, $.16-2/3 par value (the "Common Stock"), of the Company will be entitled to one vote per share on each matter submitted to the Meeting. At the close of business on the record date, there were outstanding 174,459,248 shares of Common Stock. No other voting securities of the Company were outstanding at the close of business on the record date. The holders of a majority of the total shares issued and outstanding, whether present in person or represented by proxy, will constitute a quorum for the transaction of business at the Meeting. The affirmative vote of a majority of the total shares represented in person or by proxy and entitled to vote at the Meeting is re- quired for (a) the election of directors, (b) approval of the ap- pointment of independent auditors, (c) the approval of the 1993 Stock Incentive Plan, (d) the approval of the 1993 Non-Employee Director Stock Plan, and (e) the approval of such other matters as may properly come before the Meeting or any adjournment thereof. In accordance with Delaware law, a shareholder entitled to vote for the election of directors can withhold authority to vote for all nominees for directors or can withhold authority to vote for certain nominees for directors. Abstentions from the proposals to approve the appointment of auditors, the approval of the 1993 Stock Incentive Plan or the approval of the 1993 Non-Employee Director Stock Plan are treated as votes against the particular proposal. Broker non-votes on the proposals on the election of directors, the appointment of auditors, to approve the 1993 Stock Incentive Plan or to approve the 1993 Non-Employee Director Stock Plan are treated as shares as to which voting power has been withheld by the beneficial holders of those shares and, therefore, as shares not entitled to vote on the proposal as to which there is the broker non-vote. Annual Report The Company's Annual Report to Stockholders for the fiscal year ended September 30, 1993 has been or is being furnished to stockholders of record on January 7, 1994. The Annual Report to Stockholders does not constitute a part of the proxy soliciting material. Security Ownership of Management As of January 21, 1994, the Company had no "parent," as that term is defined in regulations promulgated under the Securities Exchange Act of 1934, as amended, and none of its officers or directors beneficially owned any equity securities of any of the Company's subsidiaries, other than director's qualifying shares. The following table sets forth, as of January 21, 1994, the amount of the Company's Common Stock beneficially owned by each of its directors and nominees for directors, each executive officer named in the Summary Compensation Table, and all directors, nominees for director and executive officers as a group, based upon information obtained from such persons: Amount and Nature of Beneficial Ownership ----------------------------------------- Sole Voting Options Name of and Exercisable Other Percent Individual Investment Within 60 Beneficial of or Group Power Days Ownership Class - ----------------------------------------------------------- William D. Ruckelshaus 25,500 1,050,000 1,264 (1) * Bruce E. Ranck 80,440 212,060 3,691 (1) * Norman A. Myers 310,122 176,450 3,718 (1) * Louis A. Waters 5,780 103,750 3,339 (1) * Richard Goodyear 2,500 23,750 -0- * William T. Butler 2,500 30,000 -0- * C. Jackson Grayson, Jr. 15,200 45,000 -0- * Gerald Grinstein -0- 30,000 1,000 (2) * Harry J. Phillips, Sr. 382,820 304,450 5,246 (1) * Joseph L. Roberts, Jr. -0- 30,000 -0- * Marc J. Shapiro 2,000 -0- -0- * Robert M. Teeter 2,000 30,000 -0- * Marina v.N. Whitman 1,000 7,500 -0- * Peter S. Willmott 6,000 30,000 -0- * All Executive Officers, Nominees for Director and Directors as a Group (19 persons) 848,847 2,225,770 24,603 1.7% ---- - ------------------- *Less than one percent. (1) Represents shares allocated to the employee through his participation in the Company's Employee Stock Ownership and Savings Plan, according to the latest statement for said plan. Such shares held in the Employee Stock Ownership and Savings Plan can be voted by each employee, and each employee has investment authority over the shares of Company Common Stock held in his account in such plan, except for Company Common Stock acquired with Company matching contributions. In the case of a tender offer, the trustee shall tender or not tender Company Common Stock as directed by each participant. (2) Shares held jointly with spouse. Security Ownership of Certain Beneficial Owners According to the following institutions' respective Form 13F filings with the Securities and Exchange Commission for the period ended September 30, 1993, the following institutions were known by the Company to beneficially own more than five percent of the outstanding shares of Common Stock of the Company: Name and Amount and Address of Nature of Percent Title of Beneficial Beneficial of Class Owner Ownership Class - ----------------------------------------------------------- BFI Common Stock INVESCO CAPITAL 15,316,272(1) 8.8% MANAGEMENT, INC. 1315 Peachtree Street, N.E. Atlanta, GA 30309 BFI Common Stock SANFORD C. 10,295,947(2) 5.9% BERNSTEIN & CO., INC. One State Street Plaza New York, NY 10004 (1) Represents sole or shared investment discretion over BFI Common Stock held by IVESCO Capital Management, Inc., a holding company for investment advisory subsidiaries. These affiliated investment advisory subsidiaries reported a combined sole and shared voting power of 8,868,197 shares of BFI Common Stock, representing a 5.1% voting authority of the outstanding shares of BFI Common Stock. (2) Represents sole or shared investment discretion over BFI Common Stock. Entity has less than five percent of voting authority of the outstanding BFI Common Stock. ELECTION OF DIRECTORS Nominees The membership of the Company's Board of Directors is classified into staggered three-year terms. Four persons, Harry J. Phillips, Sr., Robert M. Teeter, Louis A. Waters and Peter S. Willmott, are current directors whose terms would otherwise expire and are being nominated to serve for three-year terms and until their respective successors have been duly elected and qualified. Marc J. Shapiro is a new nominee for director. Pursuant to the Company's By-laws, the Company's Board of Directors has set its size at fourteen members. The directors and nominees for directors whose terms will continue after the date of the Meeting total thirteen. Since the Company's Nominating Committee only nominated the persons listed in this proxy statement prior to its completion, the proxies being solicited cannot be voted for more than five nominees; however, pursuant to the Company's By-laws, the Board of Directors can fill director vacancies. It is the intention of the persons named in the enclosed form of proxy to vote such proxy for the election of the five nominees named in the proxy for a three-year term, unless otherwise directed by the stockholder. Management does not contemplate that any of the nominees will become unavailable, but if for any reason that should occur before the Meeting, it is expected either (a) that the persons named in the proxy will vote for another nominee or nominees to be selected by the Board of Directors, or (b) that the number of directors will be reduced accordingly. The following table contains certain information as of January 18, 1994, with respect to the persons who have been nominated to serve a three-year term as directors and for the Company's other directors who are currently serving terms expiring in 1995 or 1996: Positions Served and Offices as a Expiration with the Director of Present Name Company Since Age Term - ---------------- ------------------ -------- ----- ---------- William D. Chairman, Chief 1987 61 1996 Ruckelshaus Executive Officer and Director(1) Bruce E. Ranck President, Chief 1990 45 1996 Operating Officer and Director(1) Norman A. Myers Vice Chairman, Chief 1978 58 1996 Marketing Officer and Director(1) *Louis A. Waters Chairman of BFI 1969 55 1994 and International, Inc. and Director(1)(2) William T. Director(2)(4) 1990 61 1995 Butler C. Jackson Director(3)(5) 1979 70 1995 Grayson, Jr. Gerald Grinstein Director(4)(6) 1990 61 1996 *Harry J. Director(1)(2) 1970 64 1994 Phillips, Sr. Joseph L. Director (3) 1991 58 1995 Roberts, Jr. *Marc J. Nominee for Director N/A 46 N/A Shapiro *Robert M. Director(3)(6) 1989 54 1994 Teeter Marina v.N. Director(4)(5) 1992 58 1995 Whitman *Peter S. Director(5)(6) 1991 56 1994 Willmott __________________ (1) Member of the Executive Committee (2) Member of the Finance Committee (3) Member of the Pension Benefit Committee (4) Member of the Compensation Committee (5) Member of the Audit Committee (6) Member of the Nominating Committee * Indicates current nominees for director for a three-year term expiring in 1997 and until their respective successors have been elected and shall qualify. Background of Nominees for Director and Other Directors Mr. Ruckelshaus was elected a director in June 1987 and Chairman of the Board and Chief Executive Officer in October 1988. Since August 1985, he has served as an attorney of counsel to the law firm of Perkins Coie, but his active involvement with the firm ceased when he joined the Company in October 1988. He served as President of William D. Ruckelshaus Associates, an environmental consulting firm, from August 1985 to September 1988. Mr. Ruckelshaus was the first Administrator of the United States Environmental Protection Agency and served again as its Administrator from May 1983 to January 1985. Mr. Ruckelshaus also serves as a director of Cummins Engine Company, Monsanto Company, Nordstrom, Inc., Texas Commerce Bancshares, Inc. and Weyerhaeuser Company. He also serves as a director or trustee of several educa- tional and charitable organizations. Mr. Ranck became President and Chief Operating Officer of the Company in November 1991, having served as Executive Vice President (Solid Waste Operations-North America) of the Company since October 1989 and a director since March 1990. Prior to that time, he served the Company as a Regional Vice President in one of the Company's regions for a period in excess of five years. He also serves as a director of Junior Achievement of Southeast Texas, Inc. Mr. Myers was elected a Vice President of the Company in December 1970, became an Executive Vice President in July 1976, a director in February 1978, Chief Marketing Officer in March 1981 and Vice Chairman of the Board in December 1982. Mr. Myers is a director of My Friends, a foundation for children in crisis. Mr. Waters, Chairman and President of BFI International, Inc. and Chairman of the Finance Committee, served as Chairman of the Executive Committee from September 1980 until September 1988. He served as Chairman of the Board from August 1969 to September 1980. Mr. Waters serves as a director or trustee of several business, educational and charitable organizations. Dr. Butler serves as President and Chief Executive Officer of Baylor College of Medicine in Houston, Texas, a position he has held since 1979. He is a director of C.R. Bard, Inc., First City Bancorporation of Texas and Lyondell Petrochemical Company. Dr. Butler is the Past Chairman of the Association of American Medical Colleges and serves as a director, officer and/or member of several professional and civic organizations. Mr. Grayson is the founder and Chairman of the Board of American Productivity and Quality Center, a privately funded educational and research center located in Houston, Texas, a position he has held with the Center since its formation in 1975. Mr. Grayson also serves as a director of Harris Corporation, Whitman Corporation, ORYX Energy, Infomart and First City Bancorporation of Texas. Mr. Grinstein has served as Chairman and Chief Executive Officer and a director of Burlington Northern Inc. and Burlington Northern Railroad Company since February 1989. He also served as the President of these companies from February 1989 until July 1991. He served as Vice Chairman of Burlington Northern Inc. from April 1987 until December 1988. Mr. Grinstein served as Chairman of the Board of Western Air Lines, Inc. from 1983 to 1984, President and Chief Operating Officer from 1984 to 1985, Chief Executive Officer from 1985 to 1986 and from 1986 to 1987, he was Chairman and Chief Executive Officer. For a period in excess of five years ending in 1987, he was a partner in the Seattle, Washington law firm of Preston Thorgrimson Ellis & Holman. Mr. Grinstein also serves as a director of Delta Air Lines, Inc., Seafirst Corporation and Sundstrand Corporation. Mr. Phillips, Chairman of the Executive Committee, was Chairman of the Board and Chief Executive Officer from September 1980 until he resigned from those positions in September 1988. Mr. Phillips is a director of National Commerce Bancorporation, Memphis, Tennessee and a director or trustee of several other business and charitable organizations. Dr. Roberts is Senior Pastor of the Ebenezer Baptist Church in Atlanta, Georgia. He also serves as a member of the Board of Southerners for Economic Justice and other civic organizations. Mr. Shapiro is Chairman, President and Chief Executive Officer of Texas Commerce Bancshares, Inc. and its principal subsidiary, Texas Commerce Bank National Association. He also serves as an Executive Officer of Chemical Banking corporation. In 1987, he became Chief Executive Officer of Texas Commerce Bank National Association, and in 1989, he became Chief Executive Officer of Texas Commerce Bancshares, Inc. He also serves as a director of the Banker's Roundtable, Weingarten Realty Investors and Santa Fe Energy Resources, Inc. and as a director or trustee of several business, educational and charitable organizations. Mr. Teeter is President of Coldwater Corporation, a strategic planning and public affairs consulting firm. From 1979 to 1987, he served as President of Market Opinion Research. He is also a director of United Parcel Service, Detroit and Canada Tunnel Corporation and Durakon Industries, Inc., and a director or trustee of several business, educational and charitable organizations. Dr. Whitman has served as as Distinguished Visiting Professor of Business Administration and Public Policy at the University of Michigan since September 1992. Previously, she spent thirteen years General Motors Corporation, six years as Vice President and Chief Economist and seven years as Vice President and Group Executive, Public Affairs Staffs. She currently serves as a director of Procter & Gamble Company, Chemical Banking Corporation and UNOCAL Corporation, and is a member, director or trustee of several educational and professional organizations. Mr. Willmott was Chairman, President and Chief Executive Officer of Carson Pirie Scott & Co., Chicago, Illinois, from 1983 to 1989, and since 1989, he has served as Chairman and Chief Executive Officer of Willmott Services, Inc., Chicago, Illinois. He serves as Chairman of MacFrugal's Bargains and Close-Outs, Inc. and is a director of Federal Express Corporation, International Multifoods Corporation, Maytag Corporation, Morgan Keegan & Co. and Zenith Electronics Corporation, as well as being a director of various nonpublic corporations and educational or charitable organizations. The members of the Company's Executive, Audit, Compensation, Finance, Nominating and Pension Benefit Committees are reflected in the preceding table. The Executive Committee may exercise all the powers of the Board of Directors between meetings of the Board of Directors, except as delegated by the By-laws of the Company or the Board of Directors to another standing or special committee, or as reserved by the Board of Directors, but the Executive Committee does not have the power to elect or remove officers, approve a merger of the Company, recommend a sale of substantially all the Company's assets, recommend a dissolution of the Company, amend the Company's By-laws or Restated Certificate of Incorporation, declare dividends on the Company's outstanding securities, or, except as expressly authorized by the Board, issue any of the Company's Common Stock or Preferred Stock. The Audit Committee recommends the selection of and confers with the Company's independent accountants regarding the scope and adequacy of annual audits; reviews reports from the independent accountants; and meets with such independent accountants and with the Company's internal auditors and financial personnel to review the adequacy of the Company's accounting principles, financial controls and policies. The Compensation Committee reviews the Company's compensation philosophy and programs, and exercises authority with respect to the payment of direct salaries and incentive compensation to directors and officers; loans to or guarantees of obligations of such persons and some employee loans; and the administration of the stock incentive plans of the Company. The Finance Committee oversees the long-term financial planning, capital requirements and other financial needs of the Company; explores sources and alternatives for meeting such requirements and needs; makes recommendations to the Board of Directors or the Executive Committee regarding authorizing the borrowing of funds or the issuance of debt or equity securities; and oversees and reviews the finances of the Company as necessary or advisable to supplement those activities of the Executive Committee and the Audit Committee. The Nominating Committee is empowered to recommend to the whole Board of Directors nominees for election as directors and persons to fill director vacancies and newly created directorships; recruit potential director candidates; recommend changes to the whole Board of Directors concerning the responsibilities and composition of the Board of Directors and its committees; select the membership of the proxy committee charged with voting solicited proxies at stockholder meetings; and review proxy comments received from stockholders relating to the Board of Directors. In addition, the Nominating Committee will review stockholders' suggestions of nominees for director that are submitted in writing to the Nominating Committee, at the address of the Company's principal executive offices, not less than 90 days in advance of the date the Company's proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders. The Pension Benefit Committee oversees the administration and results of operation of the pension plans maintained by the Company and its subsidiaries, including the Company's Employee Stock Ownership and Savings Plan; confers with and receives reports from the actuary and investment managers of the Company's Retirement Plan; provides oversight of the pension plans maintained by the Company's subsidiaries; and reviews and makes recommendations to the Company concerning all material proposed changes to any of such pension plans. During the last fiscal year, the Executive Committee held eight meetings and took numerous actions by unanimous written consent in lieu of meetings, the Audit Committee held four meetings, the Compensation Committee held three meetings and took numerous actions by unanimous written consent in lieu of meetings, the Finance Committee held two meetings, the Pension Benefit Committee held one meeting, the Nominating Committee held four meetings and the Board of Directors held six meetings. No incumbent director attended fewer than 75 percent of the aggregate number of board meetings and meetings of committees on which he or she served. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Board of Directors of Browning- Ferris Industries, Inc. (the "Committee") is pleased to present its 1993 report on executive compensation. This Committee report documents the components of the Company's executive officer compensation programs and describes the basis on which 1993 compensation determinations were made by the Committee with respect to the executive officers of the Company, including the executive officers that are named in the compensation tables. The Committee meets regularly and is comprised entirely of non-employee directors. Compensation Philosophy and Overall Objectives of Executive Compensation Programs -- It is the philosophy of the Company to ensure that executive compensation be directly linked to continuous improvements in corporate financial performance and increases in shareholder value. The following objectives, which were previously adopted by the Committee, serve as the guiding principles for all compensation decisions: - Provide a competitive total compensation package that enables the Company to attract and retain key executives. - Integrate all pay programs with the Company's annual and long-term business objectives and strategy, and focus executive behavior on the fulfillment of those objectives. - Provide variable compensation opportunities that are directly linked with the performance of the Company and that align executive remuneration with the interests of shareholders. The Committee believes that the Company's current executive compensation program has been designed and is administered in a manner consistent with these objectives. The program for fiscal 1994 has also been designed so that the compensation paid to the named executives meets the requirements to be deductible under the Internal Revenue Code's $1 million compensation limit. Compensation Program Components -- The Committee regularly reviews the Company's compensation program to ensure that pay levels and incentive opportunities are competitive and reflect the performance of the Company. This entails a reevaluation of both the total compensation levels and the individual components, as weighted relative to one another, of the compensation program for executive officers including base salary, annual incentives and stock option awards. In determining competitive levels, the Committee obtains and utilizes information such as executive compensation surveys and comparative analyses of compensation data in proxy statements provided by the Company's human resources staff, outside compensation consultants and other sources. The Company's incentive plans are designed to link directly to financial performance measures; therefore, the actual value of an executive's compensation package will vary based on the performance of the Company. The particular elements of the compensation program for executive officers are further explained below. Base Salary -- It is the objective of the Committee to establish base salary levels for the Company's executive officers that are generally comparable to similar executive positions in companies of similar size and complexity as the Company. The Company obtains information on such other companies through published national executive compensation surveys. The Company focuses primarily on revenue size in those surveys and additional factors, such as asset size, number of employees and service industry classifications. The survey data includes a substantial number of companies beyond those reflected in the Dow Jones Pollution Control Index used in the performance graph, which includes only five companies. Actual salaries are based on individual performance contributions relative to a competitive salary range, for each position, that the Committee considers to be reasonable and necessary. The competitive range generally includes the 50th percentile (median) through the 75th percentile of the market data. However, other factors, including background, experience and scope of accountability, can influence the determination of the appropriate salary level for an executive officer. The Committee approves all salary changes for the Company's officers, and bases individual salary changes on a combination of factors such as the performance of the executive, salary level relative to the competitive market, the salary increase budget for the Company and recommendation of the Company's Chairman and Chief Executive Officer. In this regard, all named executives have employment agreements (see "Employment and Consulting Agreements"). Under these agreements, the Committee has the sole discretion for determining any increase in base salary; however, pursuant to the agreements, base salaries may not be decreased. In addition to those executive officers granted increases during fiscal 1993 which averaged 3.9%, three executive officers received promotional increases to reflect significant expansion of their respective responsibilities. Included in the promotional increases granted, the Committee established a new base salary for Mr. Ranck during fiscal 1993, as recommended by the Company's Chairman and Chief Executive Officer, in recognition of the responsibilities he accepted as President and Chief Operating Officer one and one-half years earlier. Annual Incentive Compensation -- The Company's officers are eligible to participate in an annual incentive compensation plan with awards based primarily on the attainment of certain earnings per share goals, subject to a return on assets threshold. The objective of this plan is to deliver competitive levels of compensation for the attainment of financial objectives and operating results that the Committee believes are primary determinants of share price over time. In particular, the plan aims to focus corporate behavior on consistent and steady earnings growth as measured by return on assets and earnings per share. In addition, with the exception of Messrs. Ruckelshaus and Ranck whose incentive objectives are based 100% on financial performance, each of the executive officers has specific individual performance objectives which include both qualitative and quantitative criteria focused on the priorities within their areas of functional accountability. These objectives support the Company's overall business strategies and have been determined to be drivers of corporate performance. Individual objectives represent no more than 25% of the incentive award for executive officers and are specific to strategic direction and management of Company growth, stakeholder matters and subsidiary financial performance. Targeted awards for executive officers of the Company under the plan represent the 50th percentile of the targeted awards reported for the executive positions of companies of similar size and complexity as the Company, as obtained from the same executive compensation surveys noted above. In determining these targeted levels, the comparison was based on an analysis of total cash compensation paid as well as the reported target award levels as a percentage of base salary. Actual awards are proportionately decreased or increased on the basis of the Company's and executive's performance, with the maximum award available being two times the target incentive. All financial goals and performance measures are established by the Committee at the beginning of the fiscal year. For fiscal 1993, a nineteen percent growth in earnings over fiscal 1992 was established as the performance level required for payout of target incentive awards. Actual fiscal 1993 performance resulted in 70% of the target incentive attributable to financial performance being approved by the Committee for payment to executive officers. Under Mr. Ruckelshaus' employment agreement, he is nevertheless guaranteed an annual incentive award of 25% of base salary, or one-half of his target annual incentive opportunity, which the Committee determined to be reasonable and necessary to attract and retain him as Chairman and Chief Executive Officer. For fiscal 1993, the amount of Mr. Ruckelshaus' actual incentive award, based on the Company's financial performance, exceeded the guaranteed portion. Stock Option Program -- The Committee strongly believes that by providing those persons who have substantial responsibility for the management and growth of the Company with an opportunity to increase their ownership of Company stock, the best interests of shareholders and executives will be closely aligned. Therefore, executives are eligible to receive stock options generally on an annual basis, giving them the right to purchase shares of Common Stock of the Company at a specified price in the future. As with other components of executive compensation, the Committee establishes a competitive range of annualized long-term incentive award values based on the executive's pay level, position and compensation mix, as compared to companies of similar size and complexity, as reflected in the same executive compensation surveys noted above. The Committee's competitive range does not exceed the 50th percentile of the survey data. The annualized award range is then converted to actual numbers of stock options with the value of such options estimated by using the Black-Scholes option valuation model. This option valuation model is based upon assumptions related to stock price volatility, interest rates and dividend yield. The actual number of options granted relative to the range is based upon the executive's contributions and performance. Additionally, from time to time, special circumstances (i.e., significant changes in position or responsibilities, etc.) may be considered in making an option award, and there have been instances, in prior year grants, of exceptions to the normal range, where the Committee deemed it to be appropriate. Options granted in fiscal 1993 to executive officers generally fell within the Committee's competitive range. While a past front-loaded grant of stock options was considered during the fiscal 1993 grant of stock options to the Company's Chairman and Chief Executive Officer, generally, past stock option grants are not considered when determining the number of stock options to grant in a given year. As further described below, Mr. Ruckelshaus' option award for fiscal 1993 was based on factors other than normal award practices. In the case of Mr. Waters, the level of his option award in 1993 was made pursuant to his employment agreement; this agreement has since been modified to follow the normal grant practices which the Committee has adopted. Options granted in fiscal 1993 have terms of ten years, become exercisable, subject to certain exceptions, in one-fourth annual increments beginning one year after the date of grant, and have an option price equal to 100% of the fair market value of the Company's Common Stock on the date of grant. No stock options granted from the current plans have been repriced, nor will the Committee consider option repricing in the future. Discussion of 1993 Compensation for the Chairman and Chief Executive Officer In considering the compensation for the Chairman and Chief Executive Officer for fiscal 1993, the Committee has reviewed his existing compensation arrangements and both Company and individual performance. The 1988 employment agreement between the Company and Mr. Ruckelshaus was structured to provide him with a fully competitive base salary and annual incentive opportunity and a front-loaded grant of stock options. The Committee has made the following determinations regarding Mr. Ruckelshaus' compensation: - Base salary remained unchanged through fiscal 1992 from the base salary authorized in 1988. During fiscal 1993, Mr. Ruckelshaus' base salary was adjusted from $806,000 to $850,000 based on the Committee's positive assessment of his performance and contributions as Chairman and Chief Executive Officer, which included the Company's fiscal 1993 increases in net income before special charge of 22% and in earnings per share before special charge of 13%. This places his salary slightly above the 75th percentile of the survey data which the Committee has determined to be appropriate and reasonable. - Based on the financial performance of the Company for fiscal 1993, the Committee approved the computed annual incentive award of $297,500. This represents an incentive award equal to 70% of the target established for Mr. Ruckelshaus at the beginning of the fiscal year. The Company's earnings per share performance in fiscal 1993 was equal to 70% of the goal that had been established for earnings per share performance. Of the $297,500 annual award, $212,500 (or 25% of base salary) was the guaranteed portion pursuant to Mr. Ruckelshaus' employment agreement. - Stock options for 20,000 shares of the Company's Common Stock were awarded during fiscal 1993 primarily in view of Mr. Ruckelshaus' voluntary waiver of his fiscal 1992 guaranteed annual incentive award of 25% of base salary and to align his interests with those of the shareholders. The estimated value of these 20,000 options, based on the Black-Scholes option valuation methodology, was approximately equivalent to his guaranteed award. No other stock option grants were awarded to Mr. Ruckelshaus during fiscal 1993. As indicated in the discussion above, the Company's executive compensation program is based primarily on improved financial performance and returns to shareholders. For fiscal 1993, the Committee's decisions took into consideration the fact that financial performance, as measured by earnings per share, was above that achieved for fiscal 1992, however, not yet at the level of expected full performance. Summary -- After its review of all existing components, the Committee continues to believe that the total compensation program for executives of the Company is competitive with the compensation programs provided by other corporations with which the Company compares. The Committee believes that any amounts paid under the annual incentive plan will be appropriately related to corporate and individual performances, yielding awards that are directly linked to the annual financial and operational results of the Company. The Committee also believes that the stock option program provides opportunities to participants that are consistent with the returns that are generated on the behalf of the shareholders. Finally, the Committee is actively engaged in identifying and designing alternative stock-based incentive programs, including minimum ownership and retention guidelines, to enhance executive stock ownership and further reinforce and align the executive's long-term interests with those of the Company's shareholders. Compensation Committee of the Board of Directors* Gerald Grinstein, Chairman Robert M. Teeter Marina v.N. Whitman * Mr. Robert M. Teeter resigned from the Compensation Committee on September 17, 1993, and Dr. William T. Butler was appointed to the Compensation Committee on December 7, 1993. Dr. Butler did not participate in any discussions regarding executive compensation for the Company's named executives for fiscal 1993. Executive Compensation The following table sets forth information with respect to the Chief Executive Officer and the four most highly compensated executive officers of the Company as to whom the total annual salary and bonus for the fiscal year ended September 30, 1993, exceeded $100,000. SUMMARY COMPENSATION TABLE LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS - ----------------------------------------------------------------------- (a) (b) (c) (d) (e) (f) (g) Securities Other Underlying All Name and Annual Stock Other Principal Compen- Options Compen- Position Year Salary Bonus sation (Shares) sation(2) (2)(3) - ----------- ---- -------- -------- -------- -------- ----------- William D. 1993 $828,000 $297,500 $1,807(2) 20,000 $ 4,497 Ruckelshaus, 1992 806,000 -0- (1) -0- 80,000 4,364 Chairman of 1991 806,000 -0- (1) -0- Board and Chief Executive Officer Bruce E. 1993 425,500 190,000 -0- 50,000 4,497 Ranck, 1992 371,000 -0- -0- 210,000 4,364 President 1991 371,000 -0- 29,000 and Chief Operating Officer Norman A. 1993 467,000 177,650 -0- 45,000 4,497 Myers 1992 459,000 -0- -0- 45,000 5,269 Vice 1991 448,800 -0- 15,000 Chairman and Chief Marketing Officer Louis A. 1993 348,900 148,952 -0- 145,000 179,723(5) Waters(4) 1992 341,500 -0- -0- 67,500 168,938(5) Chairman 1991 N/A N/A N/A of BFI International, Inc. Richard 1993 303,000 82,000 32,174(8) 20,000 -0- Goodyear 1992 112,500(6) 150,000(7) 88,656(8) 75,000 -0- Senior 1991 N/A N/A N/A N/A Vice President and General Counsel (1) Mr. Ruckelshaus waived receipt of his guaranteed incentive compensation for fiscal years 1991 and 1992. (2) Pursuant to the transitional provisions set forth in the proxy rules, amounts of Other Annual Compensation and All Other Compensation are excluded for the Company's 1991 fiscal year. For fiscal years 1992 and 1993, the All Other Compensation column includes the amount of the Company's match for each executive officer under the BFI Employee Stock Ownership Plan, except for Mr. Goodyear who did not participate in the Plan during fiscal years 1992 and 1993. The Other Annual Compensation amount for Mr. Ruckelshaus for fiscal 1993 represents the above-market interest rate on his deferred compensation that exceeds 120% of the applicable federal long-term rate. See "Deferral Agreement" hereafter for a discussion of Mr. Ruckelshaus' Deferral Agreement. (3) Excludes perquisites and other personal benefits, unless the aggregate amount of such compensation is the lesser of either $50,000 or 10% of the total of annual salary and bonus reported for the named executive officer. (4) Mr. Waters was not an executive officer during fiscal year 1991. (5) Includes $161,880 and $175,226 in retirement pay for fiscal years 1992 and 1993 earned for 20 years of service with the Company prior to his current position as Chairman of BFI International, Inc. Mr. Waters, as beneficiary, receives trust payments paid in accordance with a trust agreement. See "Employment and Consulting Agreements" herein for a discussion of Mr. Waters' employment agreement. (6) Consists of four and one-half months of base salary for Mr. Goodyear, who was elected Senior Vice President and General Counsel effective May 11, 1992; he was not employed by the Company prior to that time. (7) Consists of a reporting bonus and a guaranteed incentive compensation payment to Mr. Goodyear pursuant to his employment agreement. (8) These payments for moving expenses and tax gross-ups with respect to such expenses were made in connection with Mr. Goodyear's relocation to Houston, Texas. See "Certain Transactions - Housing Relocation". The amounts paid in connection with the Company's purchase and subsequent sale of Mr. Goodyear's home in Bellaire, California, have not been included in the Summary Compensation Table, because those amounts are not considered by the Company to be compensation to Mr. Goodyear under applicable Internal Revenue Service regulations. Performance Graph The following performance graph compares the performance of the Company's Common Stock to the S & P 500 Index and to the Dow Jones Pollution Control Index (which includes the Company, Chambers Development Co., Inc. (Class A), Ogden Corp., Rollins Environmental Services, Inc. and WMX Technologies, Inc.) for the Company's last five fiscal years. The graph assumes that the value of the investment in the Company's Common Stock and each index was $100 at September 30, 1988 and that all dividends were reinvested. COMPARISON OF FIVE-YEAR CUMULATIVE RETURN 200 ________________________________________________ 180 ________________________________________________ 160 ________________________________________________ 140 ________________________________________________ 120 ________________________________________________ 100 ________________________________________________ 80 ________________________________________________ 60 ________________________________________________ 40 ________________________________________________ 20 ________________________________________________ 0 ________________________________________________ 1988 1989 1990 1991 1992 1993 FISCAL YEAR ENDED SEPTEMBER 30 - - - BFI - - - S&P 500 Index - - - Dow Jones Pollution Control Index September 30, ---------------------------------- 1988 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- ---- BFI 100 153 116 76 95 95 S & P 500 Index 100 133 121 158 175 197 Dow Jones Pollution 100 148 139 146 141 125 Control Index (Textual description of performance graph for EDGAR transmission -- the chart compares the performance of BFI Common Stock over a five-year period to the S & P 500 Index and the Dow Jones Pollution Control Index, as reflected in the numerical data under the chart, with 100 representing the invested value in BFI Common Stock and the two indices at September 30, 1988). Director Compensation In fiscal 1993, non-employee members of the Board of Directors were paid an annual retainer fee of $20,000, and this amount has been increased to $30,000 ($20,000 to be paid in cash and $10,000 to be paid in Company Common Stock, assuming stockholder approval of the 1993 Non-Employee Director Stock Plan) for fiscal 1994, and are also compensated in varying annual amounts for participation on committees. Employee-directors of the Company do not receive any additional compensation from the Company for their service as a director. All members of the Executive Committee are employee-directors. Members of the Audit Committee receive $8,000 (Chairman receives $12,000); Compensation Committee members receive $6,000 (Chairman receives $9,000); the non-employee member of the Finance Committee receives $6,000 (Chairman is an employee-director); and Nominating and Pension Benefit Committee members receive $4,000 (Chairman of each committee receives $6,000). In addition, non-employee directors are paid attendance fees of $1,000 for each meeting of the Board of Directors and $500 for committee meetings. Mr. Teeter is the President of Coldwater Corporation, a strategic planning and public affairs consulting firm. He is a director of BFI and served on the Compensation Committee of BFI's Board of Directors until September 17, 1993, when he resigned as a member of the Compensation Committee. Since 1989, Coldwater Corporation has advised the Company with respect to strategic planning, policy development, public opinion analysis and public affairs, under an annual consulting agreement, at a fee of $50,000 per year. The Company considers the terms of the consulting agreement to be reasonable and to contain terms substantially similar to those the Company would have effected with an unrelated party. The Company believes that the existence of the consulting agreement did not affect Mr. Teeter's independence as a member of the Compensation Committee during his service on that committee. As part of its corporate charitable giving program, the Company makes cash contributions directly to various charitable organizations, including organizations with which certain directors are affiliated. The Company does not consider these contributions to be compensation to the directors who are affiliated with such organizations. The Company's charitable giving program does not include any "director legacy" donations. Employment and Consulting Agreements William D. Ruckelshaus, Chairman of the Board and Chief Executive Officer of the Company, has an Employment Agreement with the Company, which has a continuously renewing five-year term until he reaches age 65, and continuing year to year thereafter until terminated by the Company or Mr. Ruckelshaus. The agreement provides for (i) the payment of a minimum annual base salary, currently in the amount of $850,000; (ii) an annual cash incentive bonus of not less than 25% of base salary, payable on a date elected by Mr. Ruckelshaus and such additional cash bonus as the Compensation Committee may determine; and (iii) participation in all Company benefit plans and programs. Mr. Ruckelshaus also has the right to elect part-time status, after attaining the age of 62, for periods decreasing from four years through age 65 to one year at age 68. Bruce E. Ranck and Norman A. Myers are each parties to employment agreements with the Company, which have continuously renewing five- year terms until age 65, and continuing year to year thereafter until terminated by the Company or the employee, and which provide for the payment of minimum annual base salaries and for partic- ipation by the employee in all Company benefit plans and programs. The current annual salary for Messrs. Ranck and Myers is $480,000 and $475,000, respectively. The employment agreements include provisions governing part-time status, termination and change of control. If the Company should terminate an agreement other than for cause (as defined in the agreements), or the Company breaches the agreement, or the employee is not elected and serving in his current capacity for the Company, or the employee's duties or responsibilities are materially changed or diminished (without his consent) from his current duties, the agreement may be terminated by either party on a date up to five years after notice of termination is given. During that ensuing period, the employee would continue his employ- ment on a part-time basis and be available to consult with the Company. Generally, the employee's compensation while on part-time status would be 75 percent of the average of the employee's compensation (including salary and bonus) for the two highest of the three years prior to the employee going on part-time status. In the event that Messrs. Ruckelshaus, Ranck and Myers were termi- nated without cause during 1994 or if the employee terminated the agreement because of a breach by the Company, the annual compensation on part-time status would be approximately $728,400, $380,200 and $415,400, respectively, subject to an annual cost-of- living adjustment. A part-time status employee would continue to participate in the Company's benefit plans and programs. The agreement with each employee also provides that he may elect part- time status upon attaining the age of 62, at reduced annual compensation, subject to an annual cost-of-living adjustment, but without any participation in the Company's incentive compensation plan. In the event of a change of control of the Company, the employee may elect to receive a lump sum payment equal to three times the employee's average annualized base compensation includable in gross income over the five taxable years preceding the tax year in which the change of control occurs. If a change of control were to occur during 1994 and the election to take the change of control payment were made by Messrs. Ruckelshaus, Ranck and Myers, they would receive approximately $2,599,100, $1,942,500 and $2,092,300, respectively. The election by the employee to take the change of control payment would be in lieu of other benefits and rights under such employee's agreement, except, generally, amounts payable under pension, insurance and similar plans, reimbursement for legal and other advisory expenses and certain stock option and indemnification rights. Louis A. Waters has an employment agreement with a continuously renewing five-year term until terminated by either the Company or the employee, and provides for a current base salary of $369,990, subject to an annual cost-of-living adjustment. The agreement also has a change of control payment provision. If a change of control were to occur during 1994 and the election to take the change of control payment were made, Mr. Waters would receive approximately $2,538,300. After twenty years of services, Mr. Waters began to receive a monthly retirement benefit on February 1, 1989, which will be reduced in the future by any payments that Mr. Waters receives pursuant to the Company's retirement plan. His current monthly retirement benefit payment is approximately $14,365. This retirement benefit payment is provided by a trust at a bank, of which Mr. Waters is the beneficiary. The Company provides annual funding ($154,889 in fiscal 1993) in an amount actuarially deter- mined to provide Mr. Waters' retirement benefit. For fiscal 1993, the Company made an accrual of $252,000 for Mr. Waters' future retirement benefits. The trust agreement also has change of control provisions which, if a change of control occurs, requires the trustee to make an immediate distribution of the trust assets, which would reduce any remaining obligations of the Company to provide such benefits to Mr. Waters. Richard Goodyear has an employment agreement with the Company, which has a term ending January 15, 1997. On December 31, 1993, Mr. Goodyear stepped down as the Company's Senior Vice President and General Counsel, and he began inactive status effective January 15, 1994. His compensation while on inactive status, as fixed by his employment agreement, is $229,500 annually and he continues to participate in the Company's benefit programs. Harry J. Phillips, Sr., in accordance with his employment agreement that provides for the election of part-time employment status after reaching age 62, elected part-time status on February 1, 1992. He was a full-time employee of the Company prior to February 1, 1992. His part-time status will continue until he reaches age 65 and will continue thereafter for a renewing one year term until notice of termination is given by either him or the Company. His current base salary, as provided under his employment agreement, is $200,000 and is to compensate him for his services rendered as a part-time status employee of the Company. The agreement also has a change of control payment provision. If a change of control were to occur during 1994 and the election to take the change of control payment were made, Mr. Phillips would receive approximately $4,153,500. Pursuant to the Company's retirement plan and the Company's Benefit Restoration Plan, Mr. Phillips is receiving monthly retirement benefit payments of approximately $20,600. Stock Option Plans The Company currently maintains three plans (the "Plans"), pursuant to which options to purchase shares of the Company's Common Stock are outstanding or available for future grants. Two additional plans are being submitted for stockholder approval at this Annual Meeting of Stockholders. The purpose of the Plans is to advance the best interests of the Company by providing those persons who have substantial responsibility for the management and growth of the Company with additional incentive by increasing their proprietary interest in the success of the Company. Except for options on Common Stock granted to members of the Compensation Committee of the Board of Directors (the "Compensation Committee") that were granted by the Executive Committee of the Board of Directors prior to January 21, 1991 and options to be granted pursuant to a formula under the 1993 Non-Employee Director Stock Plan being submitted for stockholder approval, all options on Common Stock are granted by the Compensation Committee. The following table shows, as to the Chief Executive Officer and the four most highly compensated executive officers of the Company, information about option grants in the last fiscal year. The Company does not grant any Stock Appreciation Rights. OPTION GRANTS IN LAST FISCAL YEAR Grant Individual Grants Date Value - ------------------------------------------------------------- ---------- (a) (b) (c) (d) (e) (f) Grant Percentage Date Number of of Total Present Securities Options Value Underlying Granted to Based on Options Employees Exercise Black- Granted in Fiscal Price Expiration Scholes Name (Shares) 1993 (Per Share) Date Model(2) - ----------- ---------- ---------- ----------- ---------- ---------- William D. 20,000(1) 1.1% $24.81 11/30/2002 $ 196,000 Ruckelshaus Bruce E. 50,000(1) 2.7% 24.81 11/30/2002 490,000 Ranck Norman A. 45,000(1) 2.5% 24.81 11/30/2002 441,000 Myers Louis A. 145,000(1) 7.9% 24.81 11/30/2002 1,421,000 Waters Richard 20,000(1) 1.1% 24.81 11/30/2002 196,000 Goodyear _____________________ (1) Stock options granted on December 1, 1992 under the Company's 1990 Stock Option Plan. Twenty-five percent of option became fully exercisable on December 1, 1993 and, subject to certain acceleration provisions, 25% per year thereafter on a cumulative basis. (2) Based upon the Black-Scholes option valuation model, which estimates the present dollar value of BFI Common Stock to be $9.80 per option share. The actual value, if any, an executive may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised, so that there is no assurance the value realized will be at or near the value estimated by the Black-Scholes model. The assumptions underlying the Black-Scholes model include (a) an expected volatility of .368 based on the prior three years of month-end closing stock prices of BFI Common Stock, (b) a risk-free rate of return of 5.88%, which approximates the 10-year Treasury bond rate, (c) BFI Common Stock dividend yield of 2.74%, and (d) a ten year period from time of grant until exercise. The following table shows aggregate option exercises in the last fiscal year and fiscal year-end option values for the Chief Executive Officer and the four most highly compensated executive officers. The Company does not grant any Stock Appreciation Rights. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND SEPTEMBER 30, 1993 OPTION VALUES (a) (b) (c) (d) (e) Number of Securities Underlying Unexercised Value of Options at Unexercised In-the- September 30, 1993 Money Options at (Shares) September 30, 1993(1) _________________________________________ Shares Acquired on Value Exer- Unexer- Exer- Unexer- Name Exercise Realized cisable cisable cisable cisable - ----------- -------- -------- --------- ------- -------- ----------- William D. -0- $ -0- 1,045,000 100,000 $ -0- $ 485,600 Ruckelshaus Bruce E. -0- -0- 199,560 260,000 393,100 1,274,700 Ranck Norman A. -0- -0- 165,200 90,000 251,600 273,200 Myers Louis A. -0- -0- 67,500 212,500 -0- 409,700 Waters Richard -0- -0- 18,750 76,250 54,000 162,000 Goodyear (1) Computed based upon the difference between aggregate fair market value and aggregate exercise price. Retirement Plans The Company has a defined-benefit retirement plan (the "Plan"), covering all United States employees of the Company, except certain employees subject to collective bargaining agreements and certain other employees covered by other plans not made a part of the Plan. The following table shows the estimated annual benefits payable upon retirement to persons in specified salary and bonus levels and years of credited service classifications, including any amounts payable pursuant to the Plan and the BFI Benefit Restoration Plan described below: Assumed Final Five- Year Average Salary and Bonus Years of Credited Service (1) - --------------------------------------------------------------------- 10 15 20 25 30 35 -------- --------- -------- --------- ---------- -------- $ 150,000 $ 18,797 $ 28,194 $ 37,593 $ 46,991 $ 56,389 $ 65,787 200,000 25,939 38,909 51,878 64,848 77,817 90,787 300,000 40,225 60,337 80,450 100,562 120,674 140,787 500,000 68,797 103,194 137,593 171,991 206,389 240,787 700,000 97,368 146,052 194,735 243,419 292,103 340,787 900,000 125,939 188,909 251,878 314,848 377,817 440,787 1,200,000 168,797 253,194 337,593 421,991 506,389 590,787 __________________ (1) The benefit levels in the table above reflect the reduction of 60 percent of the Primary Social Security Benefit, as provided in the Plan. The benefits illustrated in the table above assume a Primary Social Security Benefit of $1,279.60 per month, based upon the law in effect on January 1, 1994 and assume normal retirement in 2002 at age 65. The remuneration covered by the Plan consists of the salaries and bonuses paid to Plan participants, including salaries and bonuses set forth in columns (c) and (d) of the Summary Compensation Table. Messrs. Ruckelshaus, Ranck, Myers, Waters and Goodyear, respectively, have 4, 22, 25, 22, and 1 years of credited service under the Plan. The Plan provides for (i) past service credit for most eligible employees who were employed by the Company or one of its subsidiaries when the Plan became effective in April 1976, (ii) normal retirement at age 65 with an early retirement option at age 55 for eligible employees, (iii) a vested benefit after five years of vesting service, (iv) retirement income of approximately 50 percent of final average earnings after 35 years of credited service and (v) spouse and disability benefits. All officers and employee-directors of the Company are covered by the Plan. Currently, the Internal Revenue Code limits the pension from the Plan to $115,641 and limits the pay used to calculate pensions to $235,840; these amounts are indexed annually to the changes in Social Security benefits. If the pension to any person would be limited by Section 415 of the Internal Revenue Code, such amounts otherwise payable to the Plan participant pursuant to the Plan would be paid directly to such participant by the Company in full, pursuant to the provisions of the BFI Benefit Restoration Plan. The purpose of the BFI Benefit Restoration Plan is to pay all participants in the Plan the full retirement benefit otherwise payable to them but for the benefit limitations imposed by Section 415 of the Internal Revenue Code. Deferral Agreement William D. Ruckelshaus, Chairman of the Board and Chief Executive Officer of the Company, entered into a Deferral Agreement with the Company on December 28, 1988. The Deferral Agreement for Mr. Ruckelshaus provides for the deferred payout of a portion of his salary and incentive compensation, as elected periodically in advance by Mr. Ruckelshaus. The Company established a bookkeeping account (the "Account") evidencing the amount of the Company's obligation to Mr. Ruckelshaus under the Deferral Agreement. The Account is credited with long-term market rates of interest. Each deferred payout from the Account will be made at the date selected by Mr. Ruckelshaus at the time he elected each deferral. See "Employment and Consulting Agreements" and "Incentive Compensation" for further information concerning Mr. Ruckelshaus' compensation arrangements with the Company. All amounts deferred for Mr. Ruckelshaus for fiscal 1993 have been reflected in the Summary Compensation Table. Certain Transactions Housing Relocation - ------------------ During fiscal 1992, the Company's Board of Directors elected Richard Goodyear as Senior Vice President and General counsel of the Company. The Company reimbursed Mr. Goodyear for expenses associated with his relocation to Houston, Texas in the amount of $88,656 in fiscal 1992 and $32,174 in fiscal 1993. During fiscal 1992, the Company purchased Mr. Goodyear's home in Bellaire, California at its appraised value of $2,850,000. After applying the proceeds received from the sale of Mr. Goodyear's home, the Company paid $1,420,035 to the management relocation company as payment for its carrying costs of mortgage, taxes and insurance, loss on sale and selling expenses, including real estate commissions, which the Company does not consider to be compensation to Mr. Goodyear under applicable Internal Revenue Service regulations. The Company considers this financial arrangement for the sale of his prior residence to be usual and customary and appropriate to encourage him to accept employment as a member of the Company's senior management. See "Employment and Consulting Agreements" for a discussion of the terms of Mr. Goodyear's employment agreement with the Company. Effective January 15, 1994, Mr. Goodyear has gone on inactive employment status. Harry J. Phillips, Jr. - ---------------------- Harry J. Phillips, Jr. resigned as an officer and director on June 26, 1989, and pursuant to the terms of his employment agreement, he elected part-time employment status, which continues for a five year term. His current base salary is $359,000, which is subject to an annual cost-of-living adjustment, and he participates in all of the Company's benefit plans for five years. He is the son of Harry J. Phillips, Sr., a director of the Company. Louis A. Waters - --------------- See discussion under "Employment and Consulting Agreements" for information concerning the trust established and funded by the Company in order to provide the retirement benefits that Mr. Waters is entitled to receive pursuant to the terms of his prior employment agreement with the Company. Wasserman/Katz - -------------- Wasserman/Katz is a management consulting firm located in Ellicott City and Potomac, Maryland. Craig W. Wasserman, Ph.D., the managing partner of the firm, is the brother-in-law of Bruce E. Ranck, BFI's President, Chief Operating Officer and a director. During fiscal 1993, Wasserman/Katz provided management consulting services to the Company, and was paid $175,000 for such services, in addition to reimbursement for expenses. Such services will continue in fiscal 1994. The Company believes that these services have been provided on terms substantially similar to those the Company would have effected with an unrelated party. Litigation On October 4, 1991, a lawsuit styled Browning-Ferris Industries, Inc., Derivatively by Sally M. Yeager, and on her own behalf and on behalf of all others similarly situated, v. William D. Ruckelshaus et al. was filed in the United States District Court for the Eastern District of Pennsylvania. The defendants include certain former and current directors and/or officers of the Company, including certain nominees for director. The suit was transferred by the court to the United States District Court for the Southern District of Texas. The suit is a purported derivative action brought by Sally M. Yeager, as a shareholder of the Company. The plaintiff seeks to have the action certified as a class action with plaintiff as the class representative. The complaint seeks damages against the individual defendants, but does not seek damages against the Company. The complaint also seeks various injunctive relief with respect to the Company's corporate suffrage process, including declaring the Company's proxy materials from 1987 to 1991 to be false and misleading and to declare the election of directors from 1987 to 1991 to be null and void. Another purported class action, with generally similar allegations, was also filed in the United States District Court for the Southern District of Texas. On October 25, 1991, a derivative lawsuit styled Susan E. Cohen, Trustee for Robert Cohen, et al. v. William D. Ruckelshaus et al. was filed in the United States District Court for the Southern District of Texas. The lawsuit alleges various breaches of fiduciary duty, waste of corporate assets and unjust enrichment. The litigation purports to be a derivative action on behalf of the Company against the individual defendants and does not seek any damages from the Company. These cases were consolidated as the case of In Re Browning-Ferris Industries, Inc. Stockholder Derivative Litigation, in the United States District Court for the Southern District of Texas. On March 3, 1993, the court granted the defendants' motion to dismiss the stockholder derivative litigation. The court ruled that the complaint did not allege facts that, if proven, would establish a claim under federal law, and because the federal court's jurisdiction of the state law claims was dependent on the maintenance of the federal law claims, the court dismissed the litigation. On April 1, 1993, the plaintiffs filed a notice of appeal to the Fifth Circuit Court of Appeals. PROPOSAL TO APPROVE APPOINTMENT OF INDEPENDENT AUDITORS The Board of Directors has appointed Arthur Andersen & Co. as independent auditors of the Company and its subsidiaries for the fiscal year ending September 30, 1994. This appointment was made subject to the approval of the Company's stockholders. Accordingly, the following resolution will be offered at the Meeting: "RESOLVED, that the appointment by the Board of Directors of Browning-Ferris Industries, Inc. of Arthur Andersen & Co. as the auditors of the Company and its subsidiary companies for the fiscal year ending September 30, 1994, is hereby approved." Arthur Andersen & Co. has been serving the Company in this capacity for the past twenty-one years and has advised the Company that it will have in attendance at the Meeting a representative who will be afforded an opportunity to make a statement, if such representative desires to do so, and will respond to appropriate questions presented at the Meeting. PROPOSAL RESPECTING 1993 STOCK INCENTIVE PLAN AND PROPOSAL RESPECTING 1993 NON-EMPLOYEE DIRECTOR STOCK PLAN Upon the recommendation of the Compensation Committee of the Board of Directors (the "Compensation Committee"), the Board of Directors adopted, and is submitting for stockholder approval, the 1993 Stock Incentive Plan (the "1993 Plan") and the 1993 Non-Employee Director Stock Plan (the "Director Stock Plan"). Complete copies of both plans are attached hereto as Annex A. The following description of these plans is qualified in its entirety by reference to Annex A, which is hereby incorporated herein by reference as if fully set forth herein. Under the 1993 Plan, options to purchase up to an aggregate of 7,000,000 shares of Common Stock (including stock awards and restricted stock grants) may be granted to certain executives, key employees, employee-directors and consultants of the Company and its subsidiary corporations, but no more than 500,000 shares of the total 7,000,000 shares of Common Stock may be awarded as stock awards and restricted stock grants. Under the Director Stock Plan, the total amount of Common Stock with respect to which Options and Common Stock paid in lieu of non-employee- directors' annual retainer shall not exceed 250,000 shares. Only non-employee directors of the Company are eligible to participate in the Director Stock Plan. In the event an option expires or is terminated or cancelled, the shares of Common Stock allocable to the unexercised portion of such option may again be subject to an option under either plan. The purpose of the plans is to benefit the Company and its subsidiary corporations through the maintenance and development of its management and non-employee directors by offering to such individuals an opportunity to become owners of the Common Stock of the Company and is intended to advance the best interests of the Company by increasing their proprietary interest in the success of the Company and its subsidiary corporations. There are seven non- employee directors eligible to participate in the Director Stock Plan, and there are approximately 850 employees eligible to participate in the 1993 Plan. Subject to stockholder approval of each plan, at January 21, 1994, 1,514,200 Options had been granted under the 1993 Plan, and no stock awards or restricted stock had been awarded under the 1993 Plan. No Options or Common Stock paid in lieu of non-employee - directors' annual retainers has been awarded under the Director Stock Plan. If stockholders approve the Director Stock Plan, the first grants of stock options and stock in lieu of the annual retainer fee will be made on the day following the Annual Meeting. The maximum number of shares of Common Stock which may be covered by options granted to any one person under the 1993 Plan is 300,000 shares. An aggregate maximum of thirty percent of the shares covered by the 1993 Plan may be granted in options to employee-directors as a group. The 1993 Plan and the granting of options thereunder will be administered by the Compensation Committee. The Compensation Committee has the power to determine which persons shall receive options under the 1993 Plan and the number of shares of Common Stock to be issued to each participant pursuant to stock awards and restricted stock grants. No Options, stock awards or restricted stock will be granted under the 1993 Plan, nor will any Options be granted or Common Stock paid in lieu of non-employee directors' annual retainers under the Director Stock Plan subsequent to December 6, 2003. The Director Stock Plan is designed to be a formula plan and will be administered by the Board of Directors. An option to purchase 5,000 shares of Common Stock shall be granted to each new non- employee director the day following the Annual Meeting at which such director is first elected or appointed to the Board as a director. Thereafter, each eligible non-employee director shall receive annual option grants the day following the Annual Meeting to purchase 2,500 shares of Common Stock. In addition, after stockholder approval, the Director Stock Plan provides that each non-employee director shall be issued each year, on the day following the Annual Meeting, shares of Common Stock, in payment of one-third of such director's annual retainer fee for his or her service as a director of the Company (i.e., currently, the one-third is $10,000, with the aggregate retainer fee being $30,000). The number of shares shall be determined based on fair market value. Such Common Stock paid in lieu of the annual director retainer's fee is restricted for three years and is subject to forfeiture upon certain events during the three-year restricted period. Assuming shareholder approval of the Director Stock Plan, an aggregate of 22,500 options to purchase shares of Common Stock shall be granted on the day following the Annual Meeting. The terms and conditions applicable to each option granted under the 1993 Plan will be, subject to the Plan, determined by the Compensation Committee at the time of grant of each option, and may vary with each option granted. Under the Director Stock Plan, options are granted for a term of ten years and become exercisable beginning one year after date of grant in annual increments of 25%. Under both plans, no stock option can be exercised earlier than six months from the date of grant. In general, an option granted under the 1993 Plan will terminate the earlier of the date of expiration or thirty days after severance of the optionee's relationship with the Company as an employee, affiliate or director. Special rules apply if an optionee dies or if an optionee is retired in good standing from the employ of the Company or a subsidiary by reason of age or disability. An option granted under the Director Stock Plan will terminate on the earlier of the date of expiration or one year after the date of ceasing to serve as a director. Special rules also apply if an optionee dies or if the optionee has ceased to serve as a director on or after attaining the age of sixty-two years. Adjustments will be made under the 1993 Plan and the Director Stock Plan in the number of shares of Common Stock which are issuable upon exercise of options and in the price per share thereof to protect the holders of options against dilution in the event of any subdivision or consolidation of Common Stock or any other capital adjustment, the payment of a stock dividend, or other increase or decrease in shares of Common Stock effected without receipt of consideration by the Company. Adjustments will also be made as necessary in the event of mergers, consolidations and sales of substantially all the assets of the Company. In the event of a sale or merger or consolidation in which the Company is not the surviving corporation or if the Company sells substantially all of its assets and is liquidated, however, the Compensation Committee of the Company may cancel such options under the 1993 Plan as of the effective date of merger, consolidation or sale and liquidation, provided that notice of such cancellation is given, and the holder of an option under the 1993 Plan and the Director Stock Plan shall have the right to exercise any non-qualified option held for at least six months (and any incentive option held for at least one year) in full during the period preceding the effective date of such merger, consolidation or sale and liquidation. The price of a share of Common Stock purchasable upon exercise of an option granted under the 1993 Plan and the Director Stock Plan may not be less than the fair market value of a share of Common Stock on the date such option is granted. Under both plans, the option price may be paid either in cash or (unless the option provides otherwise and subject to certain restrictions) by tendering Common Stock having a value equal to the option price. No Options may be repriced under either the 1993 Plan or the Director Stock Plan. Options granted under the 1993 Plan and Director Stock Plan will not be transferable by the optionee other than by will or under the laws of descent and distribution and will be exercisable only by him or his legal guardian or representative during his lifetime. No option, however, may be exercised more than ten years after the date of grant under the 1993 Plan or the Director Stock Plan. The Board of Directors has the power to amend, terminate or suspend the 1993 Plan or the Director Stock Plan; provided, however, that to the extent required to qualify the plan under Rule 16b-3 of the Securities Exchange Act of 1934, the Board may not materially increase the aggregate number of shares of Common Stock which may be issued under either plan, materially modify the requirements as to eligibility for participation in either plan or materially increase the benefits accruing to participants under either plan, without stockholder approval, and provided further that with respect to the Director Stock Plan, the Board may not amend the plan more than once every six months that would change the amount, price or timing of the initial and annual grant or the Common Stock issued in lieu of the annual retainer fee, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder. The table below shows the Options that have been granted to date to each of the following persons or groups under the 1993 Plan. No Options have been granted under the Director Stock Plan. New Plan Benefits Under the 1993 Plan(1) Name and Dollar Number Position Value Units - ---------------------- -------- --------- William D. (2) -0- Ruckelshaus, Chairman, Chief Executive Officer and Director Bruce E. Ranck, (2) 55,000 President, Chief Operating Officer and Director Norman A. Myers, Vice (2) 50,000 Chairman, Chief Marketing Officer and Director Louis A. Waters, (2) 44,400 Chairman of BFI International, Inc. and Director Richard Goodyear, (2) 20,000 Senior Vice President and General Counsel(3) Executive Officer (2) 248,400 Group Non-Executive Director (2) 44,400 Group Non-Executive Officer (2) 71,100 Employee Group All Employees as a (2) 1,514,200 Group _________________ (1) Additional Options under the 1993 Plan can be granted to the named executive officers, but no more than 300,000 Options can be granted to any participant under the 1993 Plan. (2) All Options granted under the 1993 Plan as of December 7, 1993, have been granted at the exercise price of $25.44 per share. The actual value, if any, a person may realize will depend on the excess of the stock price over the exercise price on the date the option is exercised. The closing price of BFI Common Stock on January 21, 1994, as reported in The Wall Street Journal, was $29-3/8. (3) Inactive employment status, effective January 15, 1994. While the 1993 Plan provides for the issuance of both incentive stock options and non-qualified options, no incentive stock options have been granted under the 1993 Plan. Incentive stock options may only be granted to employees of the Company and its subsidiary corporations, whereas non-qualified options may be granted to employees, directors and consultants of the Company and its subsidiary corporations. The two types of options are subject to differing federal income tax treatment. TAX STATUS Incentive Stock Options The grant of incentive stock options to an employee does not result in any income tax consequences. The exercise of an incentive stock option does not result in any income tax consequences to the employee if the incentive stock option is exercised by the employee during his employment with the Company or a subsidiary, or within a specified period after termination of employment due to death or retirement for age or disability under then established rules of the Company. However, the excess of the fair market value of the shares of stock as the date of exercise over the option price is a tax preference item for purposes of determining an employee's alternative minimum tax. An employee who sells shares acquired pursuant to the exercise of an incentive stock option after the expiration of (i) two years from the date of grant of the incentive stock option, and (ii) one year after the transfer of the shares to him (the "Waiting Period") will generally recognize long term capital gain or loss on the sale. An employee who disposes of his incentive stock option shares prior to the expiration of the Waiting Period (an "Early Disposition") generally will recognize ordinary income in the year of sale in an amount equal to the excess, if any, of (a) the lesser of (i) the fair market value of the shares as of the date of exercise or (ii) the amount realized on the sale, over (b) the option price. Any additional amount realized on an Early Disposition should be treated as capital gain to the employee, short or long term, depending on the employee's holding period for the shares. If the shares are sold for less than the option price, the employee will not recognize any ordinary income but will recognize a capital loss, short or long term, depending on the holding period. The Company will not be entitled to a deduction as a result of the grant of incentive stock option, the exercise of an incentive stock option, or the sale of incentive stock option shares after the Waiting Period. If an employee disposes of his incentive stock option shares in an Early Disposition, the Company will be entitled to deduct the amount of ordinary income recognized by the employee. Non-Qualifed Stock Options The grant of non-qualified sotck options under the 1993 Plan and Director Stock Plan will not result in the recognition of any taxable income by the participants. A participant will recognize income on the date of exercise of the non-qualified stock option equal to the difference between (i) the fair market value on that date of the shares acquired, and (ii) the exercise price. The tax basis of these shares for purposes of a subsequent sale includes the option price paid and the ordinary income reported on exercise of the option. The income reportable on exercise of the option by an employee is subject to federal and state income and employment tax withholding. Generally, the Company will be entitled to a deduction in the amount reportable as income by the participant on the exercise of a non- qualified stock option. Stock Awards Stock awards involve the issuance of shares of stock, without other payment, as additional compensation for services to the Company. The receipient will recognize taxable income equal to the fair market value of the shares on the date of the award, which becomes the tax basis in a subsequent sale. Generally, the Company will be entitled to a corresponding deduction in an amount equal to the income recognized by the recipient. Restricted Stock Grants and Stock Issued in Lieu of Director's Annual Retainer Restricted stock granted under the 1993 Plan and stock issued in lieu of the director's annual retainer for service as a member of the Company's Board of Directors under the Director Stock Plan (the "Restricted Stock Grants") generally will not be taxed to the recipient, nor deductible by the Company, at the time of grant. Restricted Stock Grants involve the issuance of stock to a participant subject to specified restrictions as to sale or transferability of the stock and/or subject to a substantial risk of forfeiture. On the date the restrictions lapse, and the stock becomes transferable or not subject to a substantial risk of forfeiture, whichever is applicable, the recipient recognizes ordinary income equal to the excess of the fair market value of the stock on that date over the purchase price paid for the stock, if any. The participant's tax basis for the stock includes the amount paid for the stock, if any, and the ordinary income recognized. The Company is entitled to a corresponding tax deduction for the amount of ordinary income recognized by the participant. Compensation Deduction Limitation In the 1993 Omnibus Budget Reconciliation Act ("OBRA"), Congress limited to $1 million per year the tax deduction available to public companies for certain compensation paid to designated executive officers. OBRA provides an exception from this limitation for certain "performance based" compensation, if various requirements are satisfied. The 1993 Plan is designed to satisfy this exception for stock options issued thereunder. Thus, the Company anticipates being entitled to deduct an amount equal to the taxable income reportable by an option recipient on exercise of a non-qualified option or Early Disposition of shares of stock acquired by exercise of an incentive stock option. Additional requirements must be satisfied, including future shareholder approval of specified performance based goals, if issuance of stock awards and Restricted Stock Grants are to satisfy this exception. At this time, however, the Company does not intend to grant a significant number of stock awards or Restricted Stock Grants in the foreseeable future. Thus, the Company does not anticipate that this deduction limitation will have a material impact. OTHER BENEFIT PLANS See "Employment and Consulting Agreements"; "Stock Option Plans"; "Retirement Plans"; and "Deferral Agreement" for certain information respecting the Company's other stock option plans and other remuneration plans of the Company. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, and written representations from reporting persons that no Form 5 was required, the Company believes that all transactions by reporting persons were reported on a timely basis. OTHER MATTERS Management of the Company does not intend to present any other items of business and knows of no other items of business that are likely to be brought before the Meeting, except those set forth in the foregoing Notice of Annual Meeting of Stockholders. However, if any other matters should properly come before the Meeting, the persons named in the enclosed proxy will have discretionary authority to vote such proxy in accordance with their best judgment on such matters. SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING OF STOCKHOLDERS Proposals of stockholders intended to be presented at the 1995 annual meeting of stockholders must be received by the Company at its principal executive offices (757 N. Eldridge, Houston, Texas 77079) by September 30, 1994 for inclusion in the Company's proxy statement and form of proxy relating to that meeting. COST OF SOLICITATION This solicitation is made on behalf of the Board of Directors of the Company. The cost of solicitation of proxies in the accompanying form will be paid by the Company. The Company will also, pursuant to regulations of the Securities and Exchange Commission, make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send proxies and proxy materials to their principals and will reimburse them for their reasonable expenses in so doing. In addition to solicitation by use of the mails, certain directors, officers and employees of the Company may solicit the return of proxies by telephone, telegram or personal interviews. In addition, the Company has retained Morrow & Co., Inc., New York, New York, to assist in the solicitation of proxies and will pay approximately $10,000 in fees for the solicitation of proxies to such firm, plus reimbursement of expenses. By Order of the Board of Directors, Gerald K. Burger Vice President and Secretary Houston, Texas January 27, 1994. EX-99 2 1993 STOCK INCENTIVE PLAN ANNEX A BROWNING-FERRIS INDUSTRIES, INC. 1993 Stock Incentive Plan 1. Purpose. The 1993 Stock Incentive Plan (the "Plan") is to benefit Browning-Ferris Industries, Inc. (the "Company") and its subsidiary corporations through the maintenance and development of its management by offering certain executives, key employees (including employee-directors) and consultants of the Company and its subsidiaries (the "Participants") an opportunity to become owners of the Common Stock, $.16-2/3 par value, of the Company and is intended to advance the best interests of the Company by providing such persons with additional incentive by increasing their proprietary interest in the success of the Company and its subsidiary corporations. 2. Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company or by another committee designated to act by the Board of Directors (the "Committee"), which Committee shall consist of not less than two members who are outside directors as described in Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules and regulations issued thereunder. Meetings shall be held at such times and places as shall be determined by the Committee. Except to the extent permitted under Rule 16b-3 or any successor rule under the Securities Exchange Act of 1934 ("Rule 16b-3"), no director serving on the Committee shall be granted or awarded equity securities or options of the Company pursuant to this Plan or any other plan of the Company or any of its affiliates during service as an administrator of a compensation or benefit plan of the Company or any of its affiliates or during the one year prior to such service. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before that meeting. In addition, the Committee may take any action otherwise proper under the Plan by the unanimous written consent of its members. No member of the Committee shall be liable for any act or omission of any other member of the Committee or for any act or omission on his own part, including but not limited to the exercise of any power or discretion given to him under the Plan, except those resulting from his own gross negligence or willful misconduct. All questions of interpretation and application of the Plan, or of options granted hereunder (the "Options") and of stock awards and restricted stock (which are defined in Paragraph 17 hereof) granted hereunder, shall be subject to the determination, which shall be final and binding, of a majority of the whole Committee. 3. Options, Stock Awards and Restricted Stock Grants. The stock subject to the Options and other provisions of the Plan shall be shares of the Company's Common Stock, $.16-2/3 par value (the "Stock"). The total amount of the Stock with respect to which Options, stock awards and restricted stock may be granted under this Plan shall not exceed in the aggregate (7,000,000) shares, but no more than 500,000 shares of Stock in the aggregate may be awarded as stock awards and restricted stock grants; provided, that the class and aggregate number of shares of Stock which may be subject to Options, stock awards and restricted stock granted hereunder shall be subject to adjustment in accordance with the provisions of Paragraph 16 hereof. Such shares of Stock may be treasury shares or authorized but unissued shares of Stock. In the event that any outstanding Option for any reason shall expire or is terminated or cancelled, the shares of Stock allocable to the unexercised portion of such Option may again be subject to an Option, stock award or restricted stock under the Plan. 4. Authority to Grant Options. The Committee may grant from time to time to such eligible individuals (the "Optionees") as set forth in Paragraph 5 an Option or Options to buy a stated number of shares of Stock under the terms and conditions of the Plan and the stock option agreement. Options granted under the Plan may, in the discretion of the Committee, be either incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock options. Each stock option agreement shall specifically state, for each Option granted thereunder, whether the Option is an incentive stock option or a non-qualified option, but any Option not designated by the Committee as an incentive stock option shall be a non-qualified stock option. In no event, however, shall both an incentive stock option and a non-qualified stock option be granted together under the Plan in such a manner that the exercise of one Option affects the rights to exercise the other. No Options shall be granted under the Plan subsequent to December 6, 2003. Except as provided in Paragraph 6, all provisions of this Plan relating to options apply to both incentive and non-qualified options. The total amount of Stock with respect to which Options may be granted under the Plan to employee-directors of the Company as a group shall not exceed in the aggregate thirty (30) percent of the total number of shares with respect to which Options may be granted pursuant to Paragraph 3 of the Plan; provided, that the class and the aforesaid maximum number of shares shall be subject to adjustments in accordance with the provisions of Paragraph 16 hereof. The only Options under the Plan which may be granted are those which either (i) are granted after adoption of the Plan and are conditioned upon approval of the Plan by the stockholders of the Company within twelve months of such adoption or (ii) are granted after both adoption of the Plan and approval thereof by the stockholders of the Company within twelve months after the date of such adoption, all as provided in Paragraph 21 hereof. The maximum number of Options which may be granted to any one participant from this Plan is 300,000; provided, that the class and the aforesaid maximum number of shares shall be subject to adjustments in accordance with the provisions of Paragraph 16 hereof. 5. Eligibility for Stock Options. Except as provided in Paragraph 6(iv), the individuals who shall be eligible to receive Options under the Plan shall be key employees (including employee- directors) of the Company or of any subsidiary corporation and any person who is a party to a written consulting agreement with the Company or any of its subsidiary corporations, as determined by the Committee. Non-employee directors are not eligible. For all purposes of the Plan, the term "subsidiary corporation" shall mean any corporation of which the Company is the "parent corporation" as that term is defined in Section 424(e) of the Code. 6. Provisions Applicable to Incentive Stock Options. The following provisions shall apply only to incentive stock options granted under the Plan: (i) No incentive stock option shall be granted to any employee who, at the time such Option is granted, owns, within the meaning of Section 422 of the Code, stock possessing more than 10 percent of the total combined voting power of all classes of Stock of the Company or any of its subsidiaries, except that such an Option may be granted to such an employee if at the time the Option is granted the option price is at least 110 percent of the fair market value of the Stock (determined in accordance with Paragraph 7) subject to the Option, and the Option by its terms is not exercisable after the expiration of five years from the date the Option is granted; (ii) To the extent that the aggregate fair market value of stock with respect to which incentive stock options (without regard to this subparagraph) are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its subsidiaries) exceeds $100,000, such Options shall be treated as Options which are not incentive stock options. This subparagraph shall be applied by taking Options into account in the order in which they were granted. If some but not all Options granted on any one day are subject to this subparagraph, then such Options shall be apportioned between incentive stock option and non-qualified stock option treatment in such manner as the Committee shall determine. For purposes of this subparagraph, the fair market value of any stock shall be determined, in accordance with Paragraph 7, as of the date the Option with respect to such Stock is granted. (iii) No incentive stock option granted under the Plan shall be exercisable any sooner than one year from the date of grant. (iv) Only employees (including employee-directors) of the Company and its subsidiary corporations shall be eligible to receive incentive stock options. 7. Option Price; Fair Market Value. The price at which shares of Stock may be purchased pursuant to an Option shall be not less than the fair market value of the shares of Stock on the date the Option is granted, and the Committee in its discretion may provide that the price at which shares may be so purchased shall be more than such fair market value. For all purposes of this Plan, the "fair market value" of the Stock shall be the mean of the highest and lowest selling prices of the Stock as reported in The Wall Street Journal for the last trading day before the date as of which such fair market value is to be determined. No Option may be repriced. 8. Duration of Options. Subject to Paragraph 6 (i), no Option shall be exercisable after the expiration of ten years from the date such Option is granted. An Option shall expire immediately following the last day on which such Option is exercisable pursuant to this Paragraph 8 or any decision of the Committee made pursuant to Paragraph 9(b). 9. Amount Exercisable. (a) Subject to Paragraph 6(iii), no Option shall be exercisable earlier than six months from the date of grant. (b) Subject to Paragraph 9(a), the Committee in its discretion may provide that an Option shall be exercisable throughout the term of the Option or during any lesser period of time commencing on or after six months from the date of grant of the Option and ending upon or before the expiration of the term. Each Option may be exercised, so long as it is valid and outstanding, from time to time in part or as a whole, subject to any limitations with respect to the number of shares for which the Option may be exercised at a particular time and to such other conditions as the Committee in its discretion may specify upon granting the Option. 10. Exercise of Options. Options shall be exercised by the delivery of written notice to the Company setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with cash, wire transfer, certified check, bank draft or postal or express money order payable to the order of the Company (the "Acceptable Funds") for an amount equal to the Option price of such shares of Stock, or at the election of the Optionee, by exchanging shares of Stock owned by the Optionee, so long as the exchanged shares of Stock plus Acceptable Funds paid, if any, have a total fair market value (determined in accordance with Paragraph 7, as of the date of exercise) equal to the purchase prices for such shares to be acquired upon exercise of said Option, and specifying the address to which the certificates for such shares are to be mailed. Whenever an Option is exercised by exchanging shares of Stock theretofore owned by the Optionee: (1) no shares of Stock received upon exercise of that Option thereafter may be exchanged to pay the Option price for additional shares of Stock within the following six months; and (2) the Optionee shall deliver to the Company certificates registered in the name of such Optionee representing a number of shares of Stock legally and beneficially owned by such Optionee, free of all liens, claims, and encumbrances of every kind, accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by such certificates, with signature guaranteed by a commercial bank or trust company or by a brokerage firm having a membership on a registered national stock exchange. Such notice may be delivered in person to the Secretary of the Company, or may be sent by mail to the Secretary of the Company, in which case delivery shall be deemed made on the date such notice is received. As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to the Optionee certificates for the number of shares with respect to which such Option has been so exercised, issued in the Optionee's name; provided, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Optionee, at the address specified pursuant to this Paragraph 10. The delivery of certificates upon the exercise of Options may, in the discretion of the Committee, be subject to any reasonable conditions, including, but not limited to (a) payment to the Company by the person exercising such Option of the amount, determined by the Company, of any tax liability of the Company (including but not limited to federal and state income and employment taxes required to be withheld) resulting from such exercise, or from a sale or other disposition of the stock issued upon exercise of such Option (or a stock option granted under another plan of the Company), if such sale or other disposition might be a "disqualifying disposition" described in Section 422(a) of the Code and (b) agreement by the person exercising such Option to provide the Company with such information as the Company might reasonably request pertaining to such exercise, sale or other disposition. Except to the extent the election would impact qualification under Rule 16b-3, the Optionee may elect to have the Company accept or retain Stock as payment of an Optionee's tax liability to the Company, as described in (a), above. 11. Transferability of Options. Options shall not be transferable by the Optionee other than by will or under the laws of descent and distribution, and shall be exercisable, during the Optionee's lifetime, only by the Optionee or his legal guardian or representative. 12. Termination of Employment of Optionee. Except as may be otherwise expressly provided herein, Options shall terminate on such date as shall be selected by the Committee in its discretion and specified in the option agreement. If an Optionee is an employee of the Company or of a subsidiary corporation at the time an Option is granted, and, before the date of expiration of the Option, an employment relationship with either the Company or a subsidiary is severed, for any reason (except as otherwise provided for herein), the Option shall terminate thirty days following severance of the employment relationship. Whether authorized leave of absence, or absence on military or government service, shall constitute severance of an employment relationship with the Company or a subsidiary corporation and the Optionee, shall be determined by the Committee at the time thereof. If, before the date of expiration of a non-qualified Option, the Optionee shall be retired in good standing from the employ of the Company or a subsidiary for reasons of age or disability under the then established rules of the Company, the Option shall terminate on the earlier of such date of expiration or one year after the date of such retirement. In the event of such retirement, the Optionee shall have the right prior to the termination of such Option to exercise the Option to the extent to which he was entitled to exercise such Option immediately prior to such retirement; however, in the event that the Optionee has retired on or after attaining the age of sixty-two (62) years, the Optionee shall be entitled to exercise all or any part of such Option (without regard to any limitations imposed pursuant to Paragraph 9(b) hereof, but subject to Paragraph 9(a)). Upon the death of the Optionee, his executors, administrators, or any person or persons to whom his Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to the earlier of the date of expiration or one year following the date of such death, to exercise the Option, in whole or in part (without regard to any limitations imposed pursuant to Paragraph 9(b) hereof, but subject to Paragraph 9(a)). The Committee shall be permitted, in its discretion, to grant to any employee an Option which is an incentive stock option or a non-qualified stock option with a provision that the Option shall continue in full force and effect as a non-qualified stock option with no modification of the option price, if the person's status with the Company or its subsidiary changes, but such person continues as a director or consultant of the Company. 13. Requirements of Law. The Company shall not be required to sell or issue any shares under any Option if the issuance of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. 14. No Rights as Stockholder. No Optionee shall have rights as a Stockholder with respect to shares covered by any Option until the date of issuance of a stock certificate for such shares; and, except as otherwise provided in Paragraph 16 hereof, no adjustment for dividends, or otherwise, shall be made if the record date thereof is prior to the date of issuance of such certificate. 15. No Employment or Nomination Obligation. The granting of any Option shall not impose upon the Company or any subsidiary any obligation to continue to nominate an Optionee for election as a director or to employ or continue to employ any Optionee; and the right of the Company or any subsidiary to terminate the employment of any employee shall not be diminished or affected by reason of the fact that an Option has been granted to the employee. 16. Changes in the Company's Capital Structure. The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation therefor in money, services or property, then (a) the number, class, and per share price of shares of stock subject to outstanding Options hereunder shall be appropriately adjusted in such a manner as to entitle an Optionee to receive upon exercise of an Option, for the same aggregate cash consideration, an equivalent total number and class of shares as he would have received had he exercised his Option in full immediately prior to the event requiring the adjustment; and (b) the number and class of shares then reserved for issuance under the Plan shall be adjusted by substituting for the total number and class of shares of Stock then reserved that number and class of shares of stock that would have been received by the owner of an equal number of outstanding shares of each class of Stock as the result of the event requiring the adjustment. After a merger of one or more corporations into the Company, or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each holder of an outstanding Option shall, at no additional cost, be entitled upon exercise of such Option to receive (subject to any required action by stockholders) in lieu of the number and class of shares as to which such Option would have been so exercisable in the absence of such event, the number and class of shares of stock or other securities to which such holder would have been entitled pursuant to the terms of the agreement of merger or consolidation if, immediately prior to such merger or consolidation, such holder had been the holder of record of the number and class of shares of Stock equal to the number and class of shares as to which such Option shall be so exercised. If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company sells or otherwise disposes of substantially all its assets to another corporation and is liquidated while unexercised Options remain outstanding under the Plan, (i) subject to the provisions of clause (iii) below, after the effective date of such merger, consolidation or sale and liquidation, as the case may be, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive, in lieu of shares of the Stock, shares of such stock or other securities as the holders of shares of such class of Stock received pursuant to the terms of the merger, consolidation or sale; (ii) the Committee may waive any limitations imposed pursuant to Paragraph 9(b) hereof so that all Options, from and after a date prior to the effective date of such merger, consolidation, or sale and liquidation, as the case may be, specified by the Committee, shall be exercisable in full, subject to Paragraph 9(a) hereof; and (iii) all outstanding Options may be canceled by the Committee as of the effective date of any such merger, consolidation or sale and liquidation provided that (x) notice of such cancellation shall be given to each holder of an Option and (y) each holder of an Option shall have the right to exercise such Option in full (without regard to any limitations imposed pursuant to Paragraph 9(b) hereof, but subject to Paragraph 9(a)) during a 30-day period preceding the effective date of such merger, consolidation or sale and liquidation. Except as herein before expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Stock then subject to outstanding Options. 17. Stock Awards and Restricted Stock Grants. A stock award consists of the issuance by the Company to a participant of shares of Stock, without other payment therefor, in lieu of certain cash compensation or as additional compensation for his services to the Company. Restricted stock grants consist of shares of Stock which are issued by the Company to a participant at a price which may be below their fair market value or for no payment, but subject to restrictions on their sale or other transfer by the Participant. The issuance of Stock pursuant to stock awards and restricted stock grants shall be subject to the following terms and conditions: (i) Number of Shares. Subject to Section 3, the number of shares to be issued by the Company to a participant pursuant to a stock award or restricted stock grant shall be determined by the Committee. (ii) Sale Price. The Committee shall determine the prices, if any, at which shares of restricted stock shall be issued to a participant, which may vary from time to time and among participants and which may be below the fair market value of such shares of Stock at the date of sale and which may be zero. (iii) Restrictions. All shares of restricted stock issued hereunder shall be subject to such restrictions as the Committee may determine, including, without limitation any or all of the following: (a) a prohibition against the sale, transfer, pledge or other encumbrance of the shares of restricted stock, such prohibition to lapse (i) at such time or times as the Committee shall determine (whether in annual or more frequent installments, at the time of the death, disability or retirement of the holder of such shares, or otherwise) or (ii) upon written certification by the Committee of the attainment of certain performance measurements; (b) a requirement that the holder of shares of restricted stock forfeit, or (in the case of shares sold to a participant) resell back to the Company at his cost, all or a part of such shares in the event of termination of the holder's employment during any period in which such shares are subject to restrictions; (c) a prohibition against employment of the holder of such restricted stock by any competitor of the Company or its affiliates, or against such holder's dissemination of any secret or confidential information belonging to the Company or a subsidiary of the Company; (iv) No participant shall exercise the election permitted by Section 83(b) of the Code without the express written approval of the Committee. Any participant making such election without such written approval shall forfeit all shares of restricted stock granted to him. Shares of restricted stock shall be registered in the name of the participant and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate shall bear a legend in substantially the following form: "The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the 1993 Stock Incentive Plan of the Company, and an agreement entered into between the registered owner and the Company. A copy of the Plan and agreement is on file in the office of the Secretary of the Company." At the end of any time period during which the shares of restricted stock are subject to forfeiture and restrictions on transfer or upon the attainment of certain performance measurements, such shares will be delivered free of all restrictions to the participant or to the participant's legal representative, beneficiary or heir. Subject to the terms and conditions of the Plan, each participant receiving restricted stock shall have all the rights of a stockholder with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares. By accepting a stock award or a restricted stock grant, the participant agrees to remit when due any federal and state income and employment taxes required to be withheld. Dividends paid in cash or property other than Stock with respect to shares of restricted stock shall be paid to the participant currently or, at the election of the participant, be reinvested by the participant under the Company's Dividend Reinvestment Plan. Shares purchased with reinvested dividends shall not be restricted. 18. Termination and Amendment of the Plan. The Board of Directors of the Company may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion; provided, however, that to the extent required to qualify the Plan under Rule 16b-3, no amendment that would (a) materially increase the number of shares of Stock that may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, or (c) otherwise materially increase the benefits accruing to participants under the Plan shall be made without the approval of the Company's stockholders. 19. Written Agreement. Each Option, or restricted stock granted hereunder shall be embodied in a written agreement, which shall be subject to the terms and conditions prescribed above and shall be signed by the participant and by the Chairman of the Board, the Vice Chairman, the President or any Vice President of the Company for and in the name and on behalf of the Company. Stock awards granted hereunder may be embodied in such a written agreement. Such an option, stock award or restricted stock agreement shall contain such other provisions as the Committee in its discretion shall deem advisable. 20. Indemnification of Committee. The Company shall indemnify each present and future member of the Committee against, and each member of the Committee shall be entitled without further act on his part to indemnity from the Company for, all expenses (including the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his being or having been a member of the Committee, whether or not he continues to be such member of the Committee at the time of incurring such expenses; provided, however, that such indemnity shall not include any expenses incurred by any such member of the Committee (a) in respect of matters as to which he shall be finally adjudged in any such action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as such member of the Committee, or (b) in respect of any matter in which any settlement is effected, to an amount in excess of the amount approved by the Company on the advice of its legal counsel; and provided further, that no right of indemnification under the provisions set forth herein shall be available to or enforceable by any such member of the Committee unless, within sixty (60) days after institution of any such action, suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and defend same at its own expense. The foregoing right of indemnification shall inure to the benefit of the heirs, executors or administrators of each such member of the Committee and shall be in addition to all other rights to which such member of the Committee may be entitled as a matter of law, contract, or otherwise. 21. Adoption, Approval and Effective Date of Plan. The Plan shall be considered adopted and shall become effective on the date the Plan is approved by the Board of Directors of the Company; provided, however, that the Plan and any grants of Options, stock awards or restricted stock grants thereunder, shall be void, if the stockholders of the Company shall not have approved adoption of the Plan within twelve months after such effective date. 22. Governing Law. This Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and shall be construed accordingly. 23. Compliance with SEC Regulations. It is the Company's intent that the Plan comply in all respects with Rule 16b-3, and any successor rule pursuant thereto. If any provision of this Plan is later found not to be in compliance with the Rule, the provision shall be deemed null and void. All grants of Options and Stock and all exercises of Options under this Plan shall be executed in accordance with the requirements of Section 16 of the Securities Exchange Act of 1934, as amended, and any regulations promulgated thereunder. EX-99.1 3 1993 NON-EMPLOYEE DIRECTOR STOCK PLAN BROWNING-FERRIS INDUSTRIES, INC. 1993 Non-Employee Director Stock Plan 1. Purpose. The 1993 Non-Employee Director Stock Plan (the "Plan") is to benefit Browning-Ferris Industries, Inc. (the "Company") and its subsidiary corporations by offering its non- employee directors (the "Eligible Directors") an opportunity to become owners of the Common Stock, $.16-2/3 par value, of the Company (the "Stock") and is intended to advance the best interests of the Company by increasing their proprietary interest in the success of the Company and its subsidiary corporations. 2. Administration. The Plan shall be administered by the Board of Directors of the Company (the "Board"). Subject to the terms of the Plan, the Board shall have the power to construe the provisions of the Plan, or of options granted hereunder (the "Options") or Stock issued hereunder, to determine all questions arising thereunder, and to adopt and amend such rules and regulations for administering the Plan as the Board deems desirable. 3. Available Shares. The total amount of the Stock with respect to which Options and Stock paid in lieu of directors' annual retainer that may be granted under this Plan shall not exceed in the aggregate 250,000 shares; provided, that the class and aggregate number of shares of Stock which may be granted hereunder shall be subject to adjustment in accordance with the provisions of Paragraph 17 hereof. Such shares of Stock may be treasury shares or authorized but unissued shares of Stock. In the event that any outstanding Option for any reason shall expire or is terminated or cancelled, the shares of Stock allocable to the unexercised portion of such Option may again be subject to an Option or Options under the Plan. 4. Authority to Grant Options and Stock. All Options granted under the Plan shall be non-qualified stock options. No Options shall be granted under the Plan subsequent to December 6, 2003. The only Options and Stock under the Plan which may be granted are those which are granted after both adoption of the Plan and approval thereof by the stockholders of the Company within twelve months after the date of such adoption, all as provided in Paragraph 21 hereof. 5. Eligibility for Stock Options and Stock. The individuals who shall be eligible to receive Options under the Plan shall be each Eligible Director of the Company. 6. Option Grant Size and Grant Dates. Initial Grants - An Option to purchase 5,000 shares of Stock (as adjusted pursuant to Paragraph 17) shall be granted to each Eligible Director the day following the Annual Meeting at which such Director is first elected or the day following the first Annual Meeting after such Eligible Director is first elected or appointed by the Board to be a Director, whichever is applicable (an "Initial Grant"); provided, that if an Eligible Director who previously received an Initial Grant terminates service as a Director and is subsequently elected or appointed to the Board, such Director shall not be eligible to receive a second Initial Grant, but shall be eligible to receive only Annual Grants as provided in this Paragraph 6, beginning with the Annual Meeting held during the fiscal year immediately following the year in which such Director was reelected or appointed. Annual Grants - An Option to purchase 2,500 shares (as adjusted pursuant to Paragraph 17) shall be granted each year, the day following the Annual Meeting, to each director who is an Eligible Director at such time (except as set forth above) and who is not receiving an Initial Grant (each, an "Annual Grant"). If however, the General Counsel of the Company determines, in his sole discretion, that the Company is in possession of material, nonpublic information about the Company, then the Initial and Annual Grant to the Eligible Directors shall be suspended until the second trading day after public dissemination of such information. 7. Option Price; Fair Market Value. The price at which shares of Stock may be purchased by an Eligible Director pursuant to an Option (the "Optionee") shall be the fair market value of the shares of Stock on the date the Option is granted. For all purposes of this Plan, the "fair market value" of the Stock shall be the mean of the highest and lowest selling prices of the Stock as reported in The Wall Street Journal for the last trading day before the date as of which such fair market value is to be determined. No Option may be repriced. 8. Duration of Options. The term of each Option hereunder shall be ten years, and no Option shall be exercisable after the expiration of ten years from the date such Option is granted. An Option shall expire immediately following the last day on which such Option is exercisable pursuant to this Paragraph 8. 9. Amount Exercisable. (a) No Option shall be exercisable earlier than six months from the date of grant. (b) An Option becomes exercisable according to the following schedule: Period from Portion of Grant That the Date the Becomes Exercisable Option is Granted after Such Period One year after grant 25% Two years after grant 50% Three years after grant 75% Four years after grant 100% 10. Exercise of Options. Options shall be exercised by the delivery of written notice to the Company setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with cash, wire transfer, certified check, bank draft or postal or express money order payable to the order of the Company (the "Acceptable Funds") for an amount equal to the Option price of such shares of Stock, or at the election of the Optionee, by exchanging shares of Stock owned by the Optionee, so long as the exchanged shares of Stock plus Acceptable Funds paid, if any, have a total fair market value (determined in accordance with Paragraph 7, as of the date of exercise) equal to the purchase prices for such shares to be acquired upon exercise of said Option, and specifying the address to which the certificates for such shares are to be mailed. Whenever an Option is exercised by exchanging shares of Stock theretofore owned by the Optionee: (1) no shares of Stock received upon exercise of that Option thereafter may be exchanged to pay the Option price for additional shares of Stock within the following six months; and (2) the Optionee shall deliver to the Company certificates registered in the name of such Optionee representing a number of shares of Stock legally and beneficially owned by such Optionee, free of all liens, claims, and encumbrances of every kind, accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by such certificates, with signature guaranteed by a commercial bank or trust company or by a brokerage firm having a membership on a registered national stock exchange. Such notice may be delivered in person to the Secretary of the Company, or may be sent by mail to the Secretary of the Company, in which case delivery shall be deemed made on the date such notice is received. As promptly as practicable after receipt of such written notification and payment, the Company shall deliver to the Optionee certificates for the number of shares with respect to which such Option has been so exercised, issued in the Optionee's name; provided, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Optionee, at the address specified pursuant to this Paragraph 10. The delivery of certificates upon the exercise of Options is subject to the condition that the person exercising such Option provide the Company with such information as the Company might reasonably request pertaining to such exercise, sale or other disposition. 11. Transferability of Options. Options shall not be transferable by the Optionee other than by will or under the laws of descent and distribution, and shall be exercisable, during the Optionee's lifetime, only by the Optionee or his legal guardian or representative. 12. Termination of Directorship of Optionee. If, before the date of expiration of the Option, the Optionee shall cease to be a director of the Company, the Option shall terminate on the earlier of such date of expiration or one year after the date of ceasing to serve as a director. In such event, the Optionee shall have the right prior to the termination of such Option to exercise the Option to the extent to which he was entitled to exercise such Option immediately prior to ceasing to serve as a director; however, in the event that the Optionee has ceased to serve as a director on or after attaining the age of sixty-two (62) years, the Optionee shall be entitled to exercise all or any part of such Option (without regard to any limitations imposed pursuant to Paragraph 9(b) hereof, but subject to Paragraph 9(a)). Upon the death of the Optionee, his executors, administrators, or any person or persons to whom his Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to the earlier of the date of expiration or one year following the date of such death, to exercise the Option, in whole or in part (without regard to any limitations imposed pursuant to Paragraph 9(b) hereof, but subject to Paragraph 9(a)). 13. Issuance of Shares in Lieu of Payment of Retainer Fee. One-third of each Eligible Director's annual retainer fee for service as a member of the Company's Board of Directors shall be paid in Stock. Such shares shall be issued the day following each Annual Meeting or the day following the first Annual Meeting after such Eligible Director is first elected or appointed by the Board to be a director, whichever is applicable. If, however, the General Counsel of the Company determines, in his sole discretion, that the Company is in possession of material, nonpublic information about the Company, then such issuance shall be delayed until the second trading day after public dissemination of such information. The number of shares to be issued shall be that number equal to one-third of the annual retainer for service as a member of the Company's Board of Directors divided by the fair market value of the Stock as determined pursuant to Paragraph 7 above. No fractional shares shall be issued, but the number of shares shall be rounded up to the nearest whole share. The Stock in lieu of retainer fee issued under this Paragraph shall have a restriction period of three (3) years. Notwithstanding any other provision of this Paragraph, such Stock shall be subject to the following terms and conditions: (a) Stock in lieu of retainer fee shall be represented by a stock certificate registered in the name of the holder. The holder shall have the right to enjoy all stockholder rights during the restriction period (including the right to vote the shares and the right to receive any cash dividends) with the exception that: (i) The holder may not sell, transfer, pledge or assign the Stock during the restriction period; (ii) The Company will retain custody of the certificate for the Stock during the restriction period; and (iii) A breach of the terms and conditions during the restriction period shall cause a forfeiture of the Stock. (b) All restrictions shall lapse and the holder of such Stock shall be entitled to the delivery of a stock certificate or certificates upon the earliest of the following: (i) Three (3) years from the date the applicable shares are issued in the name of to such holder; (ii) The date of the holder's death or disability; (iii) The date the holder, after being nominated by the Board, is not elected by the stockholders in an election for the Board; or (iv) The date on which the Board determines that the holder will not be nominated for election to the Board. (c) Restricted stock shall be entirely forfeited in the event that during a restriction period the holder: (i) Resigns (other than by reason of disability) or is removed for cause from the Board during his elected term; or (ii) Refuses to stand for an election to the Board after having been nominated by the Board or withdraws his name from consideration for nomination. For purposes of subsection (b) above, "disability" shall mean long term disability as determined under rules and procedures that apply under the Company's long term disability plan then in effect. For purposes of subsection (c) above, a holder shall be considered to have been removed for cause if and only if he is dismissed on account of any act of (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation, or conversion of assets or opportunities of the Company or any subsidiary of the Company. 14. Requirements of Law. The Company shall not be required to sell or issue any shares under any Option or as partial payment for annual retainer fees if the issuance of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. 15. No Rights as Stockholder. No Optionee shall have rights as a Stockholder with respect to shares covered by any Option until the date of issuance of a stock certificate for such shares; and, except as otherwise provided in Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if the record date thereof is prior to the date of issuance of such certificate. 16. No Employment or Nomination Obligation. The granting of any Option shall not impose upon the Company or its stockholders any obligation to employ any Optionee or to continue to nominate any Optionee for election as a director of the Company. 17. Changes in the Company's Capital Structure. The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation therefor in money, services or property, then (a) the number, class, and per share price of shares of Stock subject to outstanding Options hereunder shall be appropriately adjusted in such a manner as to entitle an Optionee to receive upon exercise of an Option, for the same aggregate cash consideration, an equivalent total number and class of shares as he would have received had he exercised his Option in full immediately prior to the event requiring the adjustment; and (b) the number and class of shares then reserved for issuance under the Plan shall be adjusted by substituting for the total number and class of shares of Stock then reserved that number and class of shares of Stock that would have been received by the owner of an equal number of outstanding shares of each class of Stock as the result of the event requiring the adjustment. After a merger of one or more corporations into the Company, or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each holder of an outstanding Option shall, at no additional cost, be entitled upon exercise of such Option to receive (subject to any required action by stockholders) in lieu of the number and class of shares as to which such Option would have been so exercisable in the absence of such event, the number and class of shares of stock or other securities to which such holder would have been entitled pursuant to the terms of the agreement of merger or consolidation if, immediately prior to such merger or consolidation, such holder had been the holder of record of the number and class of shares of Stock equal to the number and class of shares as to which such Option shall be so exercised. If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company sells or otherwise disposes of substantially all its assets to another corporation and is liquidated while unexercised Options remain outstanding under the Plan, (i) after the effective date of such merger, consolidation or sale and liquidation, as the case may be, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive, in lieu of shares of the Stock, shares of such stock or other securities as the holders of shares of such class of Stock received pursuant to the terms of the merger, consolidation or sale; and (ii) notwithstanding Paragraph 9(b) hereof, but subject to Paragraph 9(a), all Options, from and after the date of any agreement regarding such merger, consolidation, or sale and liquidation, as the case may be, shall be exercisable in full prior to the effective date of such merger, consolidation or sale and liquidation. Except as herein before expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Stock then subject to outstanding Options. 18. Termination and Amendment of Plan. The Board of Directors of the Company may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion; provided, however, to the extent required to qualify the Plan under Rule 16b- 3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended, no amendment shall be made more than once every six months that would change the amount, price or timing of the Initial and Annual Grants or the Stock issued in lieu of annual retainer fee, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder; and provided, further, to the extent required to qualify the Plan under Rule 16b-3, no amendment that would (a) materially increase the number of shares of the Stock that may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, or (c) otherwise materially increase the benefits accruing to participants under the Plan, shall be made without the approval of the Company's stockholders. 19. Written Agreement. Each Option granted hereunder or Stock issued hereunder shall be embodied in a written agreement, which shall be subject to the terms and conditions prescribed above and shall be signed by the Eligible Director and by the Chairman of the Board, the Vice Chairman, the President or any Vice President of the Company for and in the name and on behalf of the Company. 20. Indemnification of Board. The Company shall indemnify each present and future member of the Board against, and each member of the Board shall be entitled without further act on his part to indemnity from the Company for, all expenses (including the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his being or having been a member of the Board, whether or not he continues to be such member of the Board at the time of incurring such expenses; provided, however, that such indemnity shall not include any expenses incurred by any such member of the Board (a) in respect of matters as to which he shall be finally adjudged in any such action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as such member of the Board, or (b) in respect of any matter in which any settlement is effected, to an amount in excess of the amount approved by the Company on the advice of its legal counsel; and provided further, that no right of indemnification under the provisions set forth herein shall be available to or enforceable by any such member of the Board unless, within sixty (60) days after institution of any such action, suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and defend same at its own expense. The foregoing right of indemnification shall inure to the benefit of the heirs, executors or administrators of each such member of the Board and shall be in addition to all other rights to which such member of the Board may be entitled as a matter of law, contract, or otherwise. 21. Adoption, Approval and Effective Date of Plan. The Plan shall be considered adopted and shall become effective on the date the Plan is approved by the stockholders of the Company. 22. Governing Law. This Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and shall be construed accordingly. 23. Compliance with SEC Regulations. It is the Company's intent that the Plan comply in all respects with Rule 16b-3, and any successor rule pursuant thereto. If any provision of this Plan is later found not to be in compliance with the Rule, the provision shall be deemed null and void. All grants of Options and Stock and all exercises of Options under this Plan shall be executed in accordance with the requirements of Section 16 of the Securities Exchange Act of 1934, as amended, and any regulations promulgated thereunder. -----END PRIVACY-ENHANCED MESSAGE-----